June 1st, 2015 3:35 PM by Nick Rapplean
The recent real estate data are strong enough already to have broken economic analysts into two lines--one filled with people saying, "Glory be," we have an economic rebound here in the real estate sector and it deserves our heartfelt gratitude. The other line is filled with people worriedly declaring that we're rising above the hoi polloi in a bubble and, head for cover, because the sky may be preparing to fall. Again.
But let's cut to the chase.
Though we have seen strong numbers, especially related to new homes, they haven't been precariously strong. In fact--as I hope we can see--we're still a plentiful distance from anything that might be called a bubble.
So why are so many analysts so ready to worry about the recent numbers? The reason, primarily, is that real estate data--especially new homes data--has been like the boy who kept crying "wolf." The reports that all was well in the real estate sector just haven't held up over time. So a great many analysts are dubious about further reports of resilience in the real estate market.
This overlooks a few very important possibilities--a mistake I hope we can keep from duplicating.
First: The Treasury securities market is very likely in the midst of change. Its pattern of seeming to be on a slow, graceful roller coaster seems to be slipping. Instead, we're likely to see rates that continue to rise and bond values beginning to decline in a market that, as one of the most respected experts recently suggested, is at long last losing its tendency to bounce back every time a market force seems to change its direction.
As bond guru Bill Gross has been saying, "I think that the 35-year bull market in bonds and in stocks is ending. It probably ends, like T.S. Eliot said, with a whimper and not a bang." Another way of saying this is that the market corrections that we've grown accustomed to seeing for decades may surprise us--like the person who forgets to show up at his own birthday parties."
Second, then: If we're in the midst of subtle though major changes in our markets, it will pay us dividends to stay light on our feet--especially to refrain assuming that something is happening in the markets just because the markets for a moment look the way they did a couple of years ago.