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The U.S. finally has moved beyond attention-grabbing predictions from housing "experts" that housing is bottoming. The numbers are now convincing.
Nearly seven years after the housing bubble burst, most indexes of house prices are bending up. "We finally saw some rising home prices," S&P's David Blitzer said a few weeks ago as he reported the first monthly increase in the slow-moving S&P/Case-Shiller house-price data after seven months of declines.
Nearly 10% more existing homes were sold in May than in the same month a year earlier, many purchased by investors who plan to rent them for now and sell them later, an important sign of an inflection point. In something of a surprise, the inventory of existing homes for sale has fallen close to the normal level of six months' worth despite all the foreclosed homes that lenders own. The fraction of homes that are vacant is at its lowest level since 2006.
The reduced inventory of unsold homes is key, says Mark Fleming, chief economist at CoreLogic, a housing data-analysis firm. For the past couple of years, house prices have risen in the spring and then slumped; the declining supply of houses for sale is reason to believe that won't happen again this year, he says.
Builders began work on 26% more single-family homes in May 2012 than the depressed levels of May 2011. The stock of unsold newly built homes is back to 2005 levels. In each of the past four quarters, housing construction has added to economic growth. In the first quarter, it accounted for 0.4 percentage points of the meager 1.9% growth rate.
"Even with the overall economy slowing," Wells Fargo Securities economists said, cautiously, in a note to clients, "the budding recovery in the housing market appears to be gradually gaining momentum."
Economists aren't always right, but on this at least they agree: A new Wall Street Journal survey of forecasters found 44 believe the housing market has reached its bottom; only three don't. (The full results of the Journal's July survey will be released at 2pm ET)
Housing is still far from healthy despite the Federal Reserve's efforts to resuscitate it by helping to push mortgage rates to extraordinary lows: 3.62% for a 30-year loan, according to Freddie Mac's latest survey. Single-family housing starts, though up, remain 60% below the 2002 pre-bubble pace. Americans' equity in homes is $2 trillion, or 25%, less than it was in 2002 and half what it was at the peak. More than one in every four mortgage borrowers still has a loan bigger than the value of the house, though rising home prices are reducing that fraction slowly.
Still, the upturn in housing is a milestone, a particularly welcome one amid a distressing dearth of jobs. For some time, housing has been one of the biggest causes of economic weakness. It has now—barely—moved to the plus side. "A little tail wind is a lot better than a headwind," says economist Chip Case, the "Case" in Case-Shiller.
From here on, housing is unlikely to drag the U.S. economy down further. It will instead reflect the strength or weakness of the overall economy: The more jobs, the more confident Americans are about keeping their jobs, the more they are willing to buy houses. "Manufacturing had led growth and construction had lagged," JPMorgan Chase economists said last week."Now the roles are reversed: Manufacturing growth has slowed as private construction comes to life."
Plenty could go wrong. The biggest threat is a large shadow inventory of unsold homes, homes which owners won't put on the market because they are underwater, homes that will be foreclosed eventually and homes owned by lenders. They have been trickling onto the market, slowed in part by government efforts to delay foreclosures; a flood could reverse the recent rise in prices. Or the still-dysfunctional mortgage market could get worse. Or overly zealous regulators or a post-election change in government policy could unsettle mortgage lenders or home buyers.
The folks over at WSJ are showing their true colors. This article is most likely another attempt to drum up some consumer confidence and boost home sales. The evidence they site barely supports their own conclusion.
1. A single month's uptick in the Case-Shiller Index does not mean a recovery.
2. "The stock of newly built homes is back to 2005 levels." so they're still overbuilt?
3. Wells Fargo: "Overall economy slowing" yet "budding housing recovery." How does that work?
4. "Housing still far from healthy...." Yes, everything in this paragraph confirms that but regardless "rising home prices" will still keep the heart beating?
Every 'expert' quote has been spun to meet the conclusions of this article. There is nothing of substance to back up any of these claims and yet the article ends stating the bust is over.
You got that right. There has been some price recovery in some markets due to a shortage of houses available for sale, but it's mainly due to the fact banks are holding onto them, not making them available for sale, so it creates a shortage thus higher prices. In the short run it's a stroke of genius by the banks, to get the most profit (or least amount of loss). I do however question just how long they can keep houses "not for sale" on there books before the houses will be nothing better than tear downs. When houses are left vacate for years, the tend to suffer damage from thieves, squatters, vandals, animals and weather related damage.
Agreed, this seems like a hasty call of the bottom, just as it was premature to call a bottom during the home buyer tax credit uptick. We still haven't worked through the large oversupply of distressed housing and the banks are currently leaking out that inventory at much too slow of a rate to suddenly determine that this is a healthy and normal market.
Well, they're right in the sense that housing prices have stabilized. They also said that it's going to be a long, long slog back to the heady prices of 2007.
I think the interesting this is how the entire housing meltdown will affect various state and regional economies over the next reveal years. California is a total train wreck while the Great Plains and Southeast (Outside Atlanta) didn't take nearly the fiscal hit because speculation wasn't nearly as rampant. So it means that fewer people in those regions lost equity, fewer are underwater, and more likely have better long-term economic prospects. Just a thought.
Ever since the data made it obvious — at least to us — that Housing was topping out in 2006, we have watched with various degrees of bemusement the annual ritual that is the erroneous housing bottom call.
Many casual observers of Housing (along with a few pros) fail to understand the difference between monthly seasonality and actual improvement.
...
These bad calls reoccur every Spring, as the data begins its annual improvement. I use the phrase Perennially Wrong Bottom Callers and its acronym PWBC™ (I may have to trademark that!).
Quote:
2006
Housing Turnaround? Home Sales Up in March (ABC News, April 25, 2006)
Home builders see bottom of housing slump (CNN, December 5, 2006)
New home sales: Back from the dead? (CNN, December 27, 2006)
Read Between All Those For-Sale Signs (NYT, August 27, 2006)
“the latest housing numbers seem like they could be a turning point.”
“Perhaps the biggest reason to be skeptical about a real estate crash is that the country has not really suffered through one before”
New Signs of Cooling in Housing (NYT, August 24, 2006)
“While prices are sliding, most economists are still predicting that they will not fall very far.”
NAR’s Existing Home Sales & Prices (TBP, November 2006)
Greenspan Says `Worst’ May Be Past in U.S. Housing (Bloomberg, October 6, 2006)
“Fed Vice Chairman Donald Kohn, a former top adviser to Greenspan, also said this week that while he doesn’t know how long and deep the housing slump will be, it probably won’t sink the U.S. economy into a recession.”
“Former Federal Reserve Chairman Alan Greenspan said the ‘worst may well be over’ for the U.S. housing industry”
Home builders see bottom of housing slump (CNN, December 5, 2006)
“The year-long slump in the housing market may be near a bottom, say home builders”
New home sales: Back from the dead? (CNN, December 27, 2006)
“David Seiders, the chief economist with the National Association of Home Builders, agreed that the supply of homes on the market is still too high to say that the report signaled a recovery, yet he’s encouraged by the solid sales pace in this report. ‘What I’ve been looking for is stabilization, that’s what I’m reading from this,’ he said’”
2007
U.S. Realtors see gradual existing-home sales rise (Reuters, February 7, 2007)
“U.S. existing-home sales have likely hit bottom and should gradually rise this year”
IMF believes US housing market may bottom out (Reuters, April 11, 2007)
“The IMF’s forecast for another year of strong growth, with some risks, is based on the notion that the U.S. housing market will bottom out and a slowdown in U.S. capital spending will be reversed, a senior IMF official said on Wednesday.”
Every year the spring brings an uptick in prices, and every year it's the same bottom's over folks. This is why you seasonally adjust if you're not look at year-over-year numbers. If you didn't seasonally adjust consumer confidence, for example, we'd be boomtime ratchet the interest rate to 10% to stop the out of control growth every time Christmas came around. Just because the April/March C-10/C-20 are positive doesn't mean much. Year-over-year it's still modestly down.
Housing bust isn't over. Not even close. I give it until 2013 as long as the economy doesn't take a dive with the rest of the globe. People are still upside down on their mortgages. Interest rates are so low that its causing a false increase in demand. Most banks still have plenty of shadow inventory. Banks also have plenty of mortgage loan defaults that are unaccounted for on any charts. I'm still not buying...
When interest rates goes up, and fed can't do sh&t about it, then we talking if the house bust is over or not.
However, I still bought a house recently because we need a house and we can afford it, yes, it will drop, but i think enjoying life and healthy family are more important than money.
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