Is the Housing Market Bottoming?
I never thought I would contemplate the end of the housing market decline -- it's been with us for a very long time. But now there are preliminary signs of stabilization. Let's look at the charts.
The existing home sales chart has two important areas. The first lasted from roughly October 2007 to October 2008. Notice that during this time sales were relatively steady. Then came the downturn caused by last falls financial crisis when sales dipped. But now we're again seeing signs of stabilization.
New home sales have been dropping for three years. But notice that sales levels have been consistent since the beginning of this year. In addition, sales ticked up 11% last month.
Like new home sales, housing starts experienced a long decline. But, they have been steady since the beginning of the year (albeit at a low level).
Finally, we have the Case Shiller price index:
Prices are still declining year over year. However, notice the rate of year over year decline has turned upward -- meaning the rate of year over year decline slowed last month. And the reason is the month to month prices rose last month:
U.S. home prices rose in May on a month-to-month basis for the first time since July 2006, according to the national Case-Shiller home price index released Tuesday.
On a month-to-month basis, prices in 20 selected cities rose 0.5% in May, with increases in 13 cities, compared with a decline of 0.6% in April.
The blog Calculated Risk has proposed the theory that we'll see two bottoms in housing -- one in sales and one in prices. The above charts bear this theory out.
Now, there are still some big issues out there that will prevent the market from going gangbusters for some time. The U.S. consumer is de-leveraging, there is a ton of housing inventory we have to go through (including the shadow inventory on banks' balance sheets) and the banking system is still recovering from a near fatal set of conditions. In other words, stabilization at current levels or slightly higher is the most likely course of events.
This is the first month to month increase we've seen in a long time, so its too early to call it a trend. But when that increase is combined with the steady sales pace we've seen along with the bottoming exhibited in the above charts its looking like a bottom might actually be in.
Loading comments…
Want to reply to a comment? Hint: Click "Reply" at the bottom of the comment; after being approved your comment will appear directly underneath the comment you replied to
Here's the only indicator that matters:
http://www
"Total nonfarm payroll employment continued to decline in June
(-467,000). Job losses from April to June averaged 436,000 per month,
compared with losses averaging 670,000 per month from November to
March. Since the recession began in December 2007, payroll employment
has fallen by 6.5 million. In June, job losses continued to be wide-
spread across major industry sectors. (See table B-1.)
Employment in manufacturing fell by 136,000 over the month and has
declined by 1.9 million during the recession. Within the durable
goods industry, motor vehicles and parts (-27,000), fabricated metal
products (-18,000), computer and electronic products (-16,000), and
machinery (-14,000) continued to lose jobs in June. Since the reces-
sion began, employment in motor vehicles and parts has declined by
335,000, or about one-third.
Sorry Hale. I'm not buying it.
I'm not buying the baloney about the stock market either. The comments here have mnade the case.
The bottom you see is just our tax money channeled through bankrupt banks into a dead market.
No one is being fooled. The only indicator to trust is the number of total employed people.
It's still dropping like a stone.
If you haven't read this article indicating that fees to be collected surpass any reason to modify home loans, you are missing something important in understanding where the mortgage mess is going.
http://www
"“If they do a loan modification, they get a few shekels from the government,” said David Dickey, who led a mortgage sales team at Countrywide and Bank of America, leaving in March to start his own mortgage advisory firm, National Home Loan Advocates. By contrast, he said, the road to foreclosure is lined with fees, especially if it is prolonged. “There’s all sorts of things behind the scenes,” he said."
Unless we extend the mortgage tax break in 2010, this housing plateau will not last. Also we face a large number of mortgages that begin resetting shortly, and because unemployment is lasting so long for most people, savings will run out. All of these factors mean more people who cannot afford their mortgage, and more people going into foreclosure. I don't believe this is anything but a brief breathing spell in the economy.
I don't believe this stuff about house sales going up. Who's buying them? That is the key question. My bet is that it's the Speculators and Investors such as Angelo Mozilo who used to own Countrywide. If I were the public at large I would maintain a heathy skepticism and be very suspicious of this supposed good news. Those that have plenty of money to spend are most likely buying up all the homes they can get their hands on for making big money later. As a business they have nothing to lose by doing so because additionally they get tax write offs for any "Loss" in business. We of course are the beneficiaries of Congresses largesse to it's business friends.
I just bought a new home from Toll Brothers. Ground will be broken in a month.
Congratula
Residential ALT-A and Option Arms begin resetting late year, it will be a multi, multi-year process. Of equal or greater concern, is that many CRE's are currently under water, which will lead to commercial property values dropping at least 25%, resulting in many CRE's defaulting and going into foreclosure.
The bottom line - Job losses lag economic distress!
Knowing this, why would an informed father or mother encourage their offspring to secure a mortgage, during the worst economic downturn anyone currently living can ever remember! PEOPLE ARE MORE VALUABLE THAN A HOUSE, WITH OR WITHOUT A MORTGAGE, LET'S JUST ALL FACE IT!
Locally our prices are down about 10%, and total dollar volume of sales down around 15-20%.
http://www
Houses are staying on the market a little longer (20-30 days on average), but things have really picked up in the last month as people try to get into their school district of choice before the school year starts.
We refinanced our condo in October 2008 without any problems and are looking to move to a house on the other side of the golf course (walking distance to son's high school). We've spent about 20-30 grand on upgrades but expect to get only about 10 of it back. But we expect to sell quickly, given the popularity of the other units, and the 8000$ in ObamaBucks for new buyers.
Thanks Hale, for the detailed and fact driven report.
"Come September when the moratorium is up then what another moratorium? ... and then what another bailout ?
YES, of course! And then another, and then more...
Case-Shiller Index puts SF area down 50% from peak levels, back down at year 2000 levels, due to a large number of distressed sales. But the upper end is in a high-price standstill, houses listing for 200-300X monthly rents for equivalent property, prices still double 2000 levels, and nothing selling--30-50 months inventory at the high end in communities throughout the state.
The forced sales at low prices at the low end are of course welcome and necessary. But the bubble is still bubblicious at the high end and bound for a fall.
Why does this article need to be strictly moderated?
The Dr. Housing Bubble blog tells the truth about the market.
And the "bottom" is probably where they will stay for quite some time.
Tell you what... if you loan me a trillion dollars and issue me another 10 trillion dollars in loan guarantees, refuse to let homeowners bankrupt on the unsecured part of their home loan, allow me to refuse to reduce the principal on their loans, then let me kick out the homeowners and short sale their home for 75% of what they owed, and I'm pretty sure I could sell a few houses too.
Context is a killer, huh.
oh! well put. the best blog in ages
Great! And also: If you lend me Fed money at 0% that I can lend out at 5-6% which loan I then sell to Fannie and Freddie (remember bailing them out?) or use VHA financing, I'd sell some, too.
Essentially we're giving the banks a huge margin and reams of guarantees. When they make money they keep it and when they lose money we pay for it.
Go system!!
Karen, you rock. Well said.
Whatever happened to all the toxic assets the banks had on their balance sheets? If they were toxic then they must still be toxic in some regard! Did those bids ever take place?
Still there, worth little but banks are allowed to say they're worth whatever they want. A few more years of free Fed money and govt guarantees
the only way the home real estate market prices have bottomed is if the hyperinflation caused by an increasingly worthless dollar props up asset prices nominally even as the real value(measured in other currencies and gold) decreases.
Yep
Hale,
“New home sales have been dropping for three years. But notice that sales levels have been consistent since the beginning of this year. In addition, sales ticked up 11% last month.”
No they didn't.
New Home Sales in June were DOWN 21.3% from June of 2008. The National Association of Realtors detail on their own website that one cannot contrast one month to the next because of seasonal distortions, the proper manner of contrast is to the same month from the year before.
“Like new home sales, housing starts experienced a long decline. But, they have been steady since the beginning of the year (albeit at a low level).”
Housing Starts in June were DOWN 46% from the June 2008 level, and housing units authorized by building permits in June were DOWN 52% from the June 2008 level.
Also, as someone else mentioned, Median home prices dropped ANOTHER 12% in June from June of 2008.
Some "bottom" you got there.
You must be logged in to comment. Log in or connect with
