Tags: Ackman | Economy | Housing | US

Bill Ackman: Economy to Soar When Housing Improves

Friday, 09 March 2012 07:47 AM

The economy is set to soar when the housing sector finally improves, yet when that will happen "is really a big questions mark," says noted hedge fund manager Bill Ackman, managing partner at hedge fund Pershing Square Capital Management.

"You have housing prices down 30 percent to 50 percent, you have interest rates down 30 percent to 40 percent from where they were, call it five years ago. So the effective cost for owning a home is the lowest it’s been ever" and cheaper than renting an apartment, Ackman tells CNBC.

Many buyers remain on the sidelines because they are afraid of buying a home and then losing their jobs.

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"Once unemployment stabilizes, which I think we are headed in the right direction, all of a sudden people will feel comfortable buying a home," Ackman says, adding the economy that will "massively outperform expectations" once the housing market improves.

Other high-profile investors see housing prices at attractive levels, including Warren Buffett.

National Association of Realtors said its Pending Home Sales Index, which is based on contracts signed in January, rose 2 percent to 97.0, the highest reading since April 2010, according to the Associated Press.

New contracts generally lead sales by a month or two.

The figures show how improvement in the labor market is critical to housing's recovery.

"Easier mortgage lending criteria, very low rates and the improving labor market are all contributing to the beginnings of a real upturn in home sales, if not yet prices," says Ian Shepherdson, chief U.S. economist at High Frequency Economics, the Associated Press adds.

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