Whitney Tilson @ the Value Investing Congress [5.7MB PDF] via email:
The combination of limited supply (due to large numbers of loan mods), demand stimulated by massive govt subsidies (mainly the $8,000 tax credit, FHA and ultra-low interest rates), and favorable seasonality has led to four consecutive months (May-Aug) of rising home prices. As you can see from this chart (from page 78 of our housing presentation -- a newly updated version is posted at www.valueinvestingcongress.com), while home prices rose in August, the rate of increase (sequentially, relative to the previous month) was less than in July and is, I believe, the beginning of the seasonal downturn, which happens every year after the strong months circled on the chart. This year, the seasonal downturn may be exacerbated by the large number of loan mods that will fail and become foreclosures and, eventually, inventory. And if Congress doesn't renew the $8,000 tax credit and/or reins in the FHA, and if interest rates rise, look out below!
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