John Paulson, the hedge fund manager who pulled down nearly $4 billion by making bets against the housing market in 2007, has turned bullish on real estate. In a May 10 online article for Market Watch, Alistair Barr wrote that Paulson is calling for appreciation of 3% to 5% in home prices this year and another 8% to 12% in 2011.
"My advice to all Americans—if you don't own a home today now's the time to buy one," Paulson said. "If you already own one, now's the time to buy another one. If you already own two, it's time to help your children buy a home."
The comments were made in a conference call Monday to investors in his $34 billion Paulson and Company hedge funds. Paulson noted that when incomes, mortgage rates and median prices are considered, homes are at their most affordable levels in 50 years. He cited the 290,000 jobs added to payrolls last month, low mortgage rates and rising corporate profits in predicting 4-5% GDP growth in 2011 and a sharp V shaped economic recovery.
Data released by the National Association of Realtors last week support Paulson's optimism. Home prices rose in most U.S. cities in the first quarter, loan delinquencies declined and the number of pending sales were up 21.1% over March of 2009.
Of course, the future is never entirely clear and not everyone is so sanguine. Many point out that first time home buyer Federal tax credits, which expired last month, likely skewed sales figures higher. And troubled mortgage behemoths Freddie Mac and Fannie Mae both expect housing to show weakness through the rest of 2010. Still, as John Paulson's success illustrates, those who anticipate the market may reap big rewards.
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