As I have written in these pages recently, the housing market is still missing the most important part: first-time homebuyers. We have large institutions buying up homes in bulk transactions instead of a good old-fashioned housing recovery where actual home occupants fuel the recovery. Financial institutions like The Blackstone Group L.P. (NYSE/BX) are eating up the supply of foreclosed and empty homes and driving prices higher in the housing market. Why are they doing it? Because these big funds can’t get better returns elsewhere. Stock market? It’s too high. Bond market? It doesn’t pay enough. “Better buy cheap houses and get tenant money,” seems to be the new thinking. But is the financial institutional buying of homes going to really change things for the U.S. housing market? According to CoreLogic, 10.7 million homes or 22% of the entire residential households in the U.S. economy with a mortgage had negative equity in them at the end of the third quarter of 2012. And there are 5.29 million homes in the U.S. housing market that are either delinquent by 30 days or more or in foreclosure. (Source: Lender Processing Services, January 23, 2012.) As I have been stressing in Profit Confidential , the so-called “recovery” in the housing market is artificial and doesn’t really do any good to the U.S. economy. Robert J. Shiller, one of the founding fathers of S&P/Case Shiller Home Prices Index, agreed with my notion. At the World Economic Forum in Davos, Switzerland, he said “…it’s going up in the short run, what it will do in the longer run is hard to say. Maybe it will go down.” He also added that the housing market is still a “somewhat risky investment.” (Source: Wall Street Journal , “Shiller Says Housing Still Is ‘Somewhat Risky Investment,’ January 25, 2013.) The truth of the matter is that it will take years if not decades for the housing market to get back to its peak. Maybe it never will. Back in the good old days, the U.S. government helped drive home prices higher through their lack of mortgage qualification oversight. Today, we have billion-dollar institutions buying houses, pushing prices up. I am very skeptical about the small rise in house prices and the increased optimism towards the housing market. Dear reader; let’s think about it this way. Today, the U.S. government announced that the U.S. economy contracted 0.1% in the fourth quarter of 2012—the first decline in gross domestic product (GDP) since the second quarter of 2009. A surprise? Not for my readers. I’ve been writing for months that the U.S. economy is slowing. As crazy as it sounds, if the economy contracts again in the first ... Read More