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‘Homeownership Is Still the Cornerstone of the American Dream’: Rick Newman

Daily Ticker
‘Homeownership Is Still the Cornerstone of the American Dream’: Rick Newman

Housing data out this week continues to support the case that a recovery is in the making.

Home prices jumped 8.6% and 9.3% since February 2012, according to the latest reading of the S&P/Case-Shiller Home Price Index for its 10- and 20-city composites. Those are the biggest gains since 2006.

Related: Robert Shiller: Home Prices Will Remain Relatively Stagnant For Next 10 Years

Pending home sales for March also ticked up 1.5% to the highest level in three years, according to the National Association of Realtors.

Rick Newman, the chief business correspondent for U.S. News and World Report, sat down with The Daily Ticker's Lauren Lyster at the 2013 Milken Institute Global Conference to discuss what's driving the housing market.

He says both individuals and institutional investors are pushing the market forward.

In March, Blackstone Group took out a $2 billion loan to invest in single-family homes, the Wall Street Journal reported. But Blackstone is not alone. Firms like Colony Capital and Waypoint Real Estate Group are also hot to invest in housing as the market recovers.

Related: This Housing Recovery Is Different: Investors Are Now Big Buyers

Investors are pushing prices up by taking a lot of distressed property off the market and creating an increase in demand. Many of these firms are putting these properties into real estate investment trusts, or REITs, which are accessible to the retail investor.

"If you really want to invest in a housing recovery that is the way to do it," Newman says.

Some of the demand for housing is also being driven by the Federal Reserve's low interest rate policy. When the Fed starts to increase rates, the impact on the market "is a big unknown," he says.

"I think the real answer is it depends on how fast that happens," Newman adds. If the Fed changed policy over night it would be a "disaster."

Related: Toll Brothers CEO: ‘Housing Recovery Is the Real Deal This Time’

But while housing is improving, there is one black spot that still remains: mortgage financing and the fact that it is still backed by the government (i.e. Fannie Mae and Freddie Mac), Newman says.

"We live in an economy that is dominated by the government," he notes. "The whole economy is dominated by the government."

That said, "homeownership is still the cornerstone of the American dream," Newman argues. "[And] above all, it is a terrific time to buy a house and I think any way you slice it, I think that is true."

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