By Tom Bradley

I still see a number of strategists and portfolio managers citing the U.S. housing market as a risk for 2012. I don’t get it. The slump is almost six years old. Housing starts are down to an unsustainably low level of 600,000 per year. The U.S. economy is well along in sorting things out. And guess what, the market is well aware of the excess inventory and houses yet to be foreclosed.

I think the U.S. housing market will be one of the pleasant surprises for the stock market in 2012 or 2013. Housing starts and prices will begin to rise well before the excess inventory is sopped up. And investor sentiment towards this big economic engine will improve even before that happens.

In his 2011 letter to investors, Warren Buffett put his perspective on the U.S. housing market.

"Housing will come back – you can be sure of that. Over time, the number of housing units necessarily matches the number of households (after allowing for a normal level of vacancies). For a period of years prior to 2008, however, America added more housing units than households. Inevitably, we ended up with far too many units and the bubble popped with a violence that shook the entire economy."

He went on to say,

"That devastating supply/demand equation is now reversed. … At our current annual pace of 600,000 housing starts – considerably less than the number of new households being formed – buyers and renters are sopping up what’s left of the old oversupply. (This process will run its course at different rates around the country; the supply-demand situation varies widely by locale.)"

I’m not worried about U.S. residential real estate being a negative factor for the stock market. As I said at the other end of this cycle in a June, 2006 blog, “I'm inclined to think the consensus will be wrong on this one. It almost always is wrong at major turning points when a trend has been going on for a long time.”