Just in case there are still people who doubt that the residential construction industry has turned the corner, I offer these charts:
May housing starts dipped from an upwardly-revised April level, but as this first chart shows, starts are up a solid 30% since early last year. Compared to their recession low, starts are up 48%. This is almost irrefutable evidence that the residential construction industry is on the rebound, after suffering the six worst years of its existence.
This chart shows an index of home builders' sentiment, and it too clearly shows a rebound from recession-era lows. Conditions are still miserable, to be sure, but they have definitely improved.
Finally, this chart of the stocks of 18 leading home builders also shows that there has been a distinct improvement from the recession lows.
The industry can now look forward to many years of continuing gains, as home building will eventually have to catch up with the ongoing growth in home formations, and what could prove to be widespread shortages of housing. Already there is anecdotal evidence of a lack of homes for sale in some areas of the country, and even reports of bidding wars.
With everything pointing to better times ahead for the housing market, and with mortgage rates at rock-bottom, historical lows, today's conditions represent a homebuyer's dream.
In the last 52 years no recession has started unless the year over year change in Housing Starts was already negative.
ReplyDeleteToday...year over year is up 28.5%
Has anyone bought ECRI's research to determine whether there is any credible basis to their continuing call for a recession this year?
ReplyDeleteRecessionAlert has a good analysis on
ReplyDeleteECRI...there is some research available for free...the paid stuff is really good...
Scott - you need to look under the layers to see what is really going on in housing beside the rosy pictures your real estate agent buddies will tell you.
ReplyDeleteIt is clear housing starts are rebounding. No denying this and I think it is great. But from all-time horrible to just down-right terrible? That is an improvement though. Why it is improving though? Fundamental improvement in demand? Or a short term issue with supply? I believe it is mostly the latter.
Residential construction is spiking right now because we are in a manipulated market. The banks have willfully decided to keep REOs off the market for the past 6 months. They decided absence of mortgage payments are easier on their balance sheets than recognizing the loss in a sale as they can still book non-payments as income. Inventory has collapsed and homebuilders are leaping to fill the void. I am not sure it is anything more than a temporary blip.
There are millions and millions of foreclosures that need to be addressed before we can even think of a healthy housing market (yet inventory in California dropped by 50% in the last year?) This will be anther 10 year plus slog ala Japan (were is Benjamin?)
Maybe I am jaded as I live in Coastal California and I believe there will be another 20% leg down here, however it may take 5-7 years in this artificial market as the banks are doing everything they can to drag this out (for their survival). If you live in Phoenix or Las Vegas, maybe it is a different story.
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ReplyDeleteWhat household formation do you speak of? Is it the record amounts of college grads who move back home to live with their parents because they cant find works better than a Starbucks barrista? Not to mention the 100k plus in student loans they need to service while making near minimum wage.
ReplyDeleteAnd a shortage on housing? Really?
My understanding is that 4.6% of all homes in the U.S. are vacant. That's 6M plus homes. I ask you where is the housing shortage? We drastically overbuilt for more than a decade.
Are houses like bonds? Are houses expensive when mortgage rates are low? Are houses cheap when mortgage rates are high? If you buy a house now at a low interest rate will the price of your house go down when interest rates start going up as people have to make a higher monthly payment and thus can afford less of a house?
ReplyDeleteOn shadow inventory and the alleged withholding of inventory...
ReplyDeletehttp://www.corelogic.com/about-us/news/corelogic-reports-shadow-inventory-fell-in-april-2012-to-october-2008-levels.aspx
The trend is downward. Let's forget the trend a moment... Renting is becoming more expensive and has surpassed home ownership cost in many areas. Everybody needs a place of residence. If I can purchase a home at deeply discounted prices and save money vs renting in doing so, and oh by the way at record low interest rates, I would think thats the better bargain.
The whole argument on this shadow inventory ghost and banks withholding property is based on a constant demand assumption. I think that those waiting another meaning downturn in home prices will have a long time to wait. Sure, as prices level off or even increase banks may foreclose more or dump more inventory to the market, but those are healthy events in the recovery, and demand is pent up and growing.
who cares! it will not be the generator of weatlth it ever once was; it may add to gnp, but will not be a bubble if ever again.
ReplyDeleteAll the indicies show new home activity off maybe 50% from (pre-boom) 1994-2000, and down 70% from boom years 2004 -2006.
ReplyDeleteNot sure this makes a housing 'recovery'.