January data released today on existing home sales continues to support my contention that the housing sector is in recovery mode. In the top chart we see that misbegotten government efforts to stimulate housing sales (e.g., rebates) only made sales more volatile—pushing sales up in late 2009 only to depress them in 2010—but not any stronger. Over the past year we have seen some genuine improvement, with sales up about 10% from last February. As the second chart shows, with the pickup in sales activity and a modest decline in homes being put up for sale we have seen the months supply of unsold homes drop to a new post-recession low. The situation today looks better even than it did in the mini housing bust of the early 1980s. The housing market is making real progress, even though it is still in bad shape. It's not the level of home sales that counts, it's the change on the margin, and that is positive.
I view housing as a drag on the macroeconomy at this point -- I suppose small improvements make housing a bit less of a drag, but housing remains a drag nevertheless -- combined with the stagnation in working wages and jobs growth, Main Street will continue to be a drag on the US economy for years to come -- however, even though the situation along Main Street remains dire, the situation for the macroeconomy is improving dramatically -- those who converted their cash into dividend-paying equites last summer are seeing rich rewards as a result -- likewise, those who have (or are) acquiring rent-earning (occupied) real estate are also buying in a pennies on the dollar and will very likely see rich returns on those investments -- finally, those with world-class skills (what I am now viewing as "gold standard" competencies) are continuing to earn rising premiums for those skills on the global market -- in summary, those with skills and/or means are en route to becoming the grand lords of America -- those without means or skills in America should be taking cover...
ReplyDeleteHousing is already back in Los Angeles. Has been for more than a year. Good money made on buying chpea, fixing up and flipping.
ReplyDeleteI imagine some areas--Phoenix, Las Vegas, Florida---just got too overbuilt and will lag, and pull down national numbers.
Given the "re-shoring phenomena," could we see global manufacturers locate in these cheap-o towns, where a factory worker can buy a nice house for $50,000?
For such a house, in today's interest rate environs, you are talking $300 a month in mortgage payments. And living in a nice house--sure, tract homes, but with plumbing, kitchens, baths etc. It is almost like the 1960s again.
Sorry - you guys are flat wrong when it comes to housing supply and need to do better homework. This is the only item where I consistently disagree with Scott and the rest of you.
ReplyDeleteNew data from Lender Processing Services (LPS) shows that as of the end of January, there were 6,082,000 mortgages in the U.S. going unpaid. That tally includes loans that are 30 or more days delinquent and loans in foreclosure.
http://www.dsnews.com/articles/overdue-mortgages-number-6082000-2012-02-21
After a year-long reprieve from rising foreclosures, the numbers are going up again.
http://www.cnbc.com/id/46401756?source=patrick.net
Foreclosures - Beverly Hills Style
http://www.reuters.com/article/2012/02/16/us-usa-housing-hills-idUSTRE81F0B520120216
Ben - I live in LA. It is not getting better. There is a huge shadow inventory of supply.
From the "Foreclosures - Beverly Hills Style":
ReplyDelete"A huge "shadow inventory" is building of elite homes that are in default but have not been put on the market. Of the 180 distressed properties in Beverly Hills, only 12 are up for sale."
This the reality all over California right now, especially in the higher-end communities. I am not sure you all fully understand the supply dynamics going on.
This is going to be a huge drag for many years.
Unknown-
ReplyDeleteTry looking through Redfin. You know the outfit Better Shelter? They and any number of copycat outfits are buying houses in Highland Park, Elysian Valley, Lincoln Heights, Atwater, etc and making good money. Buy at $175k, dude it up and sell for $300k.
You can buy a Better Shelter house for less than $1,250 a month in payments, and have a yard and a dog and a BBQ. That's less than renting a one bedroom.
Sure downtown condos are dead, and were overbuilt. But sales are reasonably healthy in other markets.
BTW-
ReplyDeleteObama today proposed lower corporate tax rates and less loopholes.
A page out of Scott Grannis' book!
Proof that anything can happen.
Ben - if they can flip successfully in this market then bless them. They are adding true value and bring real expertise to the table. And we need more of them out there to help stabilize this market. Most "flippers" have no idea what they are doing and get killed in a declining market like this.
ReplyDeleteI think they are working in mid/low areas that have had a heavy correction already reducing their downside risk.
Supply has been restricted over the last couple years while foreclosures have been sat on by the banks. That seems to be changing over the last couple months.
Ben - if they can flip successfully in this market then bless them. They are adding true value and bring real expertise to the table. And we need more of them out there to help stabilize this market. Most "flippers" have no idea what they are doing and get killed in a declining market like this.
ReplyDeleteI think they are working in mid/low areas that have had a heavy correction already reducing their downside risk.
Supply has been restricted over the last couple years while foreclosures have been sat on by the banks. That seems to be changing over the last couple months.
NAR Continues Tradition Of Making Mockery Of Itself, Revises December Home Sales From +5% to -0.5%
ReplyDeleteI am not sure you should bother quoting NAr statistics anymore.
http://www.zerohedge.com/news/nar-continues-tradition-making-mockery-itself-revises-december-home-sales-5-05
Scott - I really think you need to go after new sources of data on the housing sector.
ReplyDeleteI am a daily reader (rare commenter) and I truly appreciate your analysis. It guides much of my outlook on the economy and investing. However I think you are misinformed when it comes to the housing market. You just CAN NOT rely on NAR statistics. They have proven themselves as self-serving liars time and time again.
They constantly revise historical statistics in an attempt to goose current headlines. The MSM eats it hook-line-and-sinker. Why don't you see through it?
Also, how can you show a shrinking supply of homes near near 6M when there are over 6M additional homes distressed and in the supply pipeline.
Down 5% in December and up 4.3% in January. January would be down if it were not for the revision. There are no bigger liars than people in real estate all the way from the local broker to the securitizers on Wall Street.
ReplyDeleteSales should be up as prices are down. The government should stop trying to support prices.
Housing, corporate profits, this idiotic stock market all of the result of easy money which translated into higher tax revenues for governments to spend.
ReplyDeleteWe need another type revolution to dig us out of this hole and it ain't any time soon.....unless the Martians invade.
Well, it's good if the RE market is starting to improve, if that indicates an improving economy. But I wouldn't mind if the market stays low just a bit longer, since my wife and I plan to purchase a home sometime this year. From the looks of it, we don't need to be in any hurry.
ReplyDeleteUnknown, is correct, that the NAR is always motivated to promoted the industry in the most positive light..
ReplyDeleteAs a trade group, I am not likely to view their data as fact...The next recession, coming this year, will add hundred of thousands of homes to a barely recovering real estate market, as underwater homeowners take a hike...
Hear is a much clearer picture of the housing stock in America..
http://www.businessinsider.com/a-quick-breakdown-of-americas-1318-million-homes-2012-2
I needed to add, that with interest rates at historical lows, we should be seeing the housing sector growing at double figures, quarter after quarter..
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