Existing home sales in April were close to expectations, but as this chart shows, the pace of sales has been improving: sales are up 14% since last July.
It's also nice to see that prices are bottoming/improving as well; this chart shows the median price of existing single family homes, adjusted for inflation. Over the past year, real prices have jumped about 8%. The chart also suggests that real home prices have found support at levels that have prevailed over long periods. In short, the housing bubble has burst and prices have finally returned to sensible levels. The repricing of the U.S. housing stock has allowed the market to clear; we've seen the worst, and now things are beginning to improve on the margin.
But not only have prices become reasonable from an historical perspective, the cost of purchasing a home relative to median family incomes has now fallen to record-low levels, as shown in the chart above of housing affordability.
The evidence is becoming very strong that at the very least we have seen a bottom in the residential housing market.
Different areas are experiencing different paths of course. Here is today's headline from the Austin American Statesman:
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"It's now a seller's market in Central Texas, real estate experts say"
The dwindling inventory is coming at a time of rising demand, making for the tightest supply that housing expert Mark Sprague said he has seen in more than 30 years tracking the region's market.
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Multi-family (apartments) have seen prices increase over 20% this year. Prices now exceed what they were before the bust. I know this personally because I've been looking to buy for about that long, but kept getting outbid.
This is a false bottom. The banks are keeping houses off the market to trick people into believing that prices have hit bottom. But prices haven’t hit bottom, in fact, they still have a long way to go.
ReplyDelete“Lenders hope they can solve all their problems by making the housing market hit bottom. If prices bottom, people who bought at the bottom gain equity with rising prices, and they in turn reignite the move-up market which will allow the banks to sell their high-end shadow inventory. Further, rising prices makes for fewer short sales and fewer foreclosures and distressed sellers become equity sales. Rising prices would be a panacea for lenders, which is why the full weight of our government and the federal reserve is working to make house prices go back up. …. they hope they can create an artificial bottom and momentum to carry them through the liquidation of their distressed inventory.” (“11.8% of all loans at least 30 days past due or in foreclosure”, OCHousing News)
“More than 80 percent of the repossessed homes in the Portland area are off the market, The Oregonian newspaper reports …..at least part of the delay is likely a bookkeeping maneuver because the repossessed homes haven’t been marked down to their new market value….Another reason to delay selling the backlog is because home prices might crumble if a wave of properties hits the market at the same time.” (“Portland-area lenders slow to release shadow housing inventory”, The Republic)
ReplyDelete“Phoenix: RealtyTrac identifies 6,611 “bank-owned” properties there. An Arizona realty website lists only 275 for sale.” (“Bankers Are Still Wrecking Housing Market Fundamentals”, Abigail Field, Firedog Lake)
ReplyDeleteBottom? no way...
By the way why do you keep using NAR statistics? They have proven time and time again that they blatantly lie in their stats.
Foreclosures Show No Sign of Decline (Per the WSJ)
ReplyDelete11.8% of all loans were at least 30 days past due or in foreclosure. And the banks are just sitting on them. 1 in 10 houses in the U.S. sits empty. We have NOT cleared supply. This will be going on for a while.
http://online.wsj.com/article/SB10001424052702303448404577407982615943616.html?grcc=afba02eeab1e733e10a2cb0075501125Z3ZhpgeZ0Z20Z200Z25Z2&mod=WSJ_hpp_sections_news
Unknown, knows the truth of the matter. It is another reason why Bank Bernank has a FedZero policy, for without it the housing affordability index would be making new records each and every month...
ReplyDeleteYes, and there is a related cost to this "good news" capital formation and interest returns...
FHA, is still doling out 3.5% down loans, to keep the real estate candle burning...
Due to the bubble, more people were able to buy houses and own something for once in their lives. Of course, for that to happen, millions suffered unemployment and bankruptcy. In Argentina (and I talk about this country because I have lived there and know the economic situation) properties are seen as the best investment possible due to the lack of economic stability so the Argentina apartments cost a lot of money. Most of the people who own one, own another that they use to rent it and get money from there: that is the investment!
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