Green Shoots or Green around the Gills?

The stock markets were down over 2% today mostly due to increased pessimism about the near term economic prospects. Many are skeptical about the recent wave of "green shoots" sighted on the economic landscape. Today we had two interesting posts that show just how "murky" this bottom may be.

The first video and posting from "Tech Ticker" at Yahoo finance talks about positive news regarding housing...

Housing Is Recovering, Fast, Jeff Matthews Says
Posted Jun 15, 2009 03:27pm EDT by Aaron Task
Related: DHI, HOV, LEN, PHM, MAS, XHB, CTX

Home prices continue to tumble, and have further to go to get back to pre-bubble levels, according to the bears. Another wave of foreclosure is coming down the pike, especially as another big slug of Alt-A mortgages start resetting to higher rates in 2010 and 2011. Plus, inventories remain elevated and now rising mortgage are putting a crimp in refinancing activity.

But Jeff Matthews, founder of Ram Partners takes a variant view: "What's happening in the real world is this: the housing market is recovering, fast," the fund manager recently wrote on his blog.

Matthews' optimism on housing is based on the following factors, as discussed in the accompanying video:

• The inventory of unsold homes is coming down rapidly from the peak levels of last year. Hovnanian has even sited shortages in some previously saturated markets, Matthews notes.

• Housing affordability has improved dramatically from its all-time low levels in recent years.

• Buyers are emerging and markets are "clearing" in some of the hardest-hit areas, like Phoenix, Sacramento and Las Vegas. Don't dismiss these buyers as mere speculators looking to get back what they lost in 2008, Matthews says.

The current bottoming process may, indeed, prove to be the proverbial eye of the housing hurricane when all is said and done, Matthews says. Still, he believes it's a mistake to dismiss the improvements and says too many observers are busy looking in the rearview mirror vs. focusing on the reality in front of them.

Please note...the first comment on this posting as seen on Tech Ticker's blog was "BULLSHIT"...I guess every green shoot needs a little fertilizer.

The next indicator was the homebuilder sentiment index as posted by AP...I guess the only appropriate comment would be..."No rain, no rainbows"? I think we are still looking at a very unstable bottom.

Homebuilder sentiment index slips 1 pointHomebuilder sentiment index drops by 1 point in June

• Alex Veiga, AP Real Estate Writer
• On Monday June 15, 2009, 1:10 pm EDT

LOS ANGELES (AP) -- The National Association of Home Builders says its housing market index slipped by one point in June, reflecting many builders' uncertainty about when their business prospects might improve.

The Washington-based trade association said Monday the index fell to 15 -- the first decline since January, when the index dropped to an all-time low of 8.
Index readings lower than 50 indicate negative sentiment about the market.
The report reflects a survey of 548 residential developers nationwide, tracking builders' perceptions of market conditions.

The index readings for current sales conditions and traffic by prospective buyers remained unchanged from May. The reading on expectations for sales over the next six months dropped by a point.