By Anthony Mirhaydari, for
Why it's time to buyBasically, the bull's case as outlined by Ackman can be boiled down to a few simple bullet points:
Don't fear the 'shadow inventory'We should mention the supply side of the equation where there is a lot of concern that the "shadow" inventory of unsold, foreclosed and delinquent loan homes will weigh on prices in the years to come.
Already the supply of existing homes totals nearly 11 months of supply. New home inventory totals around eight months of supply. Compare this to a low of less than four months of supply back in 2004 and it's clear that the market is swamped. But Maury Harris at UBS isn't worried. He believes that despite as many as two million annual foreclosures hitting the market in the next few years, prices should stabilize by the end of 2011. It's as simple as supply and demand.
Related Article: On the demand side, Harris is looking for a big bounce back in job-driven household formation. Census data shows that as the recession bared its claws, young adults were increasingly forced to live with other relatives -- pushing the household formation rate to 50-year lows. Although the jobs recovery has been tepid so far, the number of new households being formed is already bouncing back and has returned to pre-recession levels. Living with mom and dad loses its appeal pretty fast no matter how much cash you save. On the supply side, extremely low new housing construction starts will limit the amount of excess housing units hitting the market. A dearth of new construction and tightened credit standard will force people into rentals -- boosting rents and changing the buy vs. rent calculus back in favor of the homebuyer and landlords/investors looking to cash in on the rental boom. Four 2011 gadgets sure to flop Related Article: 5 oil mutual funds worth watching The Edge. For a free trial, log in using the following credentials: user name: trial; password: edge. The author can be contacted at email@example.com.