Thursday, April 22, 2010

More signs of a housing bottom





Data released today provide more support for the theory that we have seen the bottom in housing. The first chart is an index of the stocks of 18 leading home builders. It has reached a 19-month high, and is up 140% from its March '09 low. The second chart is the result of a survey of home builders that covers questions on present sales, sales expectations, and prospective buyer traffic. It is still quite low, but has more than doubled from its January '09 low. The third chart shows a continuing decline in the supply of unsold homes on the market. The pace of the decline looks very much like what occurred in early- to mid-1980s housing market recovery. The fourth chart shows a clear bottoming in the number of existing homes sold (the spike late last year was related to the anticipated end of the home buyers' credit).

Add to these signs of resurgent activity the fact that mortgage rates are at or very near all-time lows; that housing prices in 20 major markets have dropped by one-third in real terms since reaching a peak four years ago; and that signs of a general economic recovery are widespread. The resulting picture becomes quite clear: the great housing market bust is over, and a new growth cycle is underway.

10 comments:

brodero said...

Median existing home price 170700...Median family income 61 521
Ratio 170700/61521 = 2.77.... historical median for this ratio over the last 35 years has been 2.75....lowest for the ratio was 2.60 in 1990 but 30 year mortgage was 10.00% then....

Benjamin said...

Guys are buying houses in Los Angeles for about 200k, duding them up, and selling for $400k.

The bottom is here already.

I think we see a long, long rally in property, due to long-term outlook of low interest rates.

John said...

Benj,

I agree. It is still in the late first or early second inning. A nice long cycle is starting.

Lowes & Home Depot are in strong uptrends. A big percentage of HD's sales come from CA. Here in Florida my local Lowes is busy.

One other 'tell'. Homebuilders are buying land again. Maybe they are early but they are buying.

Paul said...

we're working on our 3rd foreclosure flip in Az right now. So far it's been a no-brainer, though the margins are healthy but not huge.

John said...

Paul,

Glad to know that. Opportunity is there.

The XHB is flying today. IMO investors are strongly smelling a bottom.

Paul said...

John,

Here's the program if you are interested: http://ailaz.com/

John said...

Paul,

I looked at the site. Thank you. It appears that opportunity is there for people willing to take a risk.

I visited Tuscon a few years ago for a USTA annual meeting. I liked the desert and low humidity. I'm sure winters there are nice. It looked to me like a good place to live and invest.

Best Wishes and good luck!!

John said...

Benj,

I just spoke with a good tennis friend in Little Rock Ark who is doing the same thing. He and his wife (who is a realtor) have flipped three deals in the last eight weeks (personal flips). He didn't say how much he made and I didn't ask but I could tell he was one pleased dude. I'm VERY happy for him and I told him so.

All this is anecdotal but I can't see how it could be happening if things were not getting significantly better.

As the forced sales dwindle the steals will be fewer and the margins should fall but for those with a nose for this stuff I can't imagine a better market. Soon buyers are going to realize that sellers are saying 'no more markdowns' and that really contributes to the bottom psychology. Then a rush starts. I've seen it before and it can happen so freaking fast. I still don't think we are there but I do believe its coming. I just don't know when.

bregabob said...

I'm not convinced. Still a big overhang of of unforclosed deliquencies. Banks may use a price uptick to unload.

Burak T said...

It would be really nice to see these graphs vs S&P500. I wonder what people were thinking in early 2007 when there was 7 months of unsold home supply in the country.