Most Americans Still Want To Own A Home But Concerns Remain

According to a New York Times article, Americans still remain committed to the dream of owning a home, but many doubt that the housing market represents a good investment anymore. Around 9 in 10 Americans say that homeownership is an important part of the American dream according to a new New York Times/CBS News poll. Furthermore, they want to keep it that way. According to the poll, support for helping people who are financially hurting over the housing market is higher than support for assisting those who have been unemployed for an extended period of time. Around 45% of respondents said that the government should be doing more to improve the state of the housing market, while 16% said that they should be doing less. A full 53% said that the government should provide direct assistance to those having trouble paying their mortgages. Citizens are increasingly placing the blame for the implosion of the housing market on financial institutions, with 42% of respondents blaming lenders, while 29% blame regulators. In early 2008, the responses were reversed with most people blaming regulators. Very few people blamed the borrowers themselves for taking on loans that they could not afford. “I believe the financial institutions willingly and knowingly allowed people to apply and receive credit at a rate higher than they could afford and this has degraded our economy,” said Steven Goode, an environmental health manager in Las Vegas, in a follow-up interview. Despite the continued belief in owning a home being a part of the American dream, a significant number of respondents do not think that it is a safe investment. Only 49% call it a safe investment while 45% believe that it is a risky one. “For the average person, it might not be a good idea today to buy,” said another respondent, Beth Lovcy of Troutdale, Ore., who bought a year ago. The value has already shrunk, but Mrs. Lovcy is unfazed. “It works out better financially than renting now because we can claim the interest on the mortgage.”

ACTION ITEMS

Bullish View:

• Are you optimistic on the housing market? This appears to be a classic contrarian bet. If so, consider the SPDR S&P Homebuilders ETF XHB


• The housing market has become inextricably linked with the outlook for U.S. financial stocks. This is another contrarian bet, where you can buy stocks no one else wants on the cheap. Consider the Financial Select Sector SPDR ETF XLF.


• If the housing market turns around, the entire stock market is likely a solid bet, gain broad exposure through the SPDR S&P 500 ETF SPY

Bearish View:

• Is the housing market completely broken? Do prices need to still fall dramatically to bring equilibrium to the market? Consider shorting heavily exposed banks such as Bank of America BAC and Wells Fargo WFC


• If the housing market continues to plunge, it shows that deleterious deflationary forces are still alive and well in the economy. In this case, consider shorting companies who have high debt to equity ratios. Deflation will be particularly difficult on them.


• If you are afraid of deflation, consider buying the PowerShares DB US Dollar Index Bullish ETF UUP, as falling asset prices should boost the U.S. Dollar.