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A modest downtick in existing homes sales in August (barely visible in the third chart above) was the reason that the market sold off today, according to a Bloomberg headline, but I think that's a stretch. As all three of these charts show, there has been a distinct turn for the better in the housing market. The months' supply of unsold homes has dropped significantly, thanks mainly to a pickup in sales activity, and the vacancy rate of homes nationwide as dropped, although the rate is still among the highest ever recorded.
4 comments:
Scott,
What do you make of reports that there are millions of homes subject to foreclosure in the coming months that will cause another big drop in prices and resumption of the credit crisis?
That information has been staring the world in the face for many months now. MBS and CMBS securities that are sensitive to default risk long ago priced in some pretty dramatic assumptions about the coming foreclosure crisis. I think the market has fully digest this news. Meanwhile, I also think the economy is picking up more than the market is prepared to believe. So I think there is a decent chance that this foreclosure wave won't have much of an impact. Bad news is bad only if it's unexpected.
Anecdotally, here in So. Calif. we've seen lots of foreclosures in hard-hit areas for a long time, yet sales activity is up and prices are no longer falling. In fact, I hear more and more stories about bidding wars.
Scott-
Housing is such an old news story. Foreclosures might keep going at an otherwise nasty pace but it is all factored in. The market is looking at two things 1) operating leverage - companies laid off too many workers frankly b/c they could and a modest recovery in the top line will mean better than expected earnings; 2) the rest of the world doesn't have Obama as President and they can't afford to indulge in the crap that we are indulging in - they are getting back to business aggressively and many US companies are allocating capital to take advantage. So the prospects of cos that can shift capital abroad is actually quite good.
This is a classic case of reading the papers and being bearish and missing the big picture.
I can tell you firsthand the foreclosure auctions in Arizona are red hot right now. Flippers are back in the game, albeit with much smaller spreads.
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