Friday, October 19, 2012

Housing update

Just a few updated charts to chronicle the ongoing improvement in the housing market:

Although September sales were down a bit from August levels, the above chart shows that the uptrend in sales is still intact. Sales are up 11% in the past year.

Despite all the talk about the great shadow inventory of foreclosed properties that have yet to hit the market, the inventory of homes for sale has fallen to 5.9 months' worth of sales. This is much lower than the levels that prevailed in the 1980s, and is only marginally higher than what we saw in the boom years of the early 2000s. Bloomberg's story on the subject contains these choice tidbits: "sales of previously owned U.S. homes decreased in September ... restrained by a lack of supply," and ""the median price from a year earlier jumped by the most since 2005 as inventories dwindled." If home-buying enthusiasm picks up, we could see some real shortages—and higher prices—in the coming year or two.

This last chart illustrates the degree to which prices have rebounded over the past year.

Sales are down and prices are up because of restrained supply: quite an amazing development.


William said...
This comment has been removed by the author.
William said...

American Association of Individual Investors
For week ending October 17, 2012:

Bullish 28.7%

Neutral 26.8%

Bearish 44.5%

Change from last week:
Bullish: -1.9
Neutral: -3.8
Bearish: +5.7

Long-Term Average:
Bullish: 39%
Neutral: 31%
Bearish: 30%

Benjamin Cole said...

I have been saying, and I think I have been right, that the last year has marked a historic window to buy housing as an investment.

You ain't going to get the package of battered down prices, constrained supplies and ultra-low interest rates too often.

Good luck out there. With leverage, doubling your equity money or a lot more might happen in the next few years.

Not sure Wall Street can say the same, and in fact pretty sure it can't.

Gloeschi said...

Scott, how many days does it take to foreclose a home in CA?

Answer: more than 1,000.

You guys are working off 2009 delinquencies right now.

Scott Grannis said...

Gloeschi: it is true that there is a lot of housing supply in the wings, but it is also true that the demand for housing can increase just as much or more than the supply. That is a key factor missing from your evaluation of the housing market.

Public Library said...

Tweet from Gross:

"Fed merry-go-round: inflate stocks til 2000. Then inflate housing til 2007. Then inflate stocks til 2012. Now inflate housing again."

McKibbinUSA said...

I am getting very bullish about housing -- if anything, QE3 is likely to overcorrect the housing inventory problem, and we may even see inventories of both old and new housing hitting historic lows within 2-3 years -- I've been looking at the latent demand for housing amongst Americans ages 25-40, and I the numbers are revealing -- I'll post something soon on my blog, but needless to say, if money can be placed into the hands of younger Americans via career opportunities and lending availability, then housing is going to take off -- and again, QE3 is all about mortgage lending via mortgage backed securities -- the big lenders are going to be very eager to buy up and repackage loans as mortgage backed securites in the coming 1-2 years -- the Fed is promising that QE3 will not be suspended until employment is improved dramatically, so this drive into mortgage lending has staying power -- I'm still not sure where military spending is going, and Romney promises to commit another $2 trillion (in some form) to defense spending, so we have to keep an eye on that -- but yes, housing is looking bright -- also, the California budget is a looming catastrophe -- in the meantime, I never expected QE3 to focus on mortgage backed securities exclusively, and so every investor needs to take notice by lining up some construction deals with private equity -- that's what I am doing in any case -- deal flow is alive as I sit here -- I am curious if others are seeing the same -- regards to all -- I'm busy the next couple of months, so I'll only be able to visit Scott's excellent blog intermitantly -- regards to all!

McKibbinUSA said...

PS: Again, I caveat my predictions above with the uncertainly of where Romney (if he is elected) will lead the US -- clearly, Romney is eager to lead the US into a regional war that will require a military buildup in the US, and that will place a moral obligation on the Fed to borrow money via treasuries in order to fund an expanded overseas war -- I know I am painting Romney as a closet warmonger, and that's definitely a risk given the propensity of military-industrial Republicans to prefer defense spending over any other form of government spending -- again, I am terrifed of both the big government Democrats and military-industrial Republicans, and I sincerely hope that the American people might give QE3 a shot at reducing the inventory of unsold homes in America, as well as to promote new construction -- if the US goes to war with Islam, then all bets are off...

Unknown said...

Scott - you never seem to ask why is supply so constrained?

Lenders are not being forced to liquidate. The suspension of mark-to-market accounting relieved any pressure on lenders to clean up their balance sheets.

Lenders face almost no costs to carry non-performing loans on their books. Usually, lenders go bankrupt if they have a large number of non-performing assets because the costs of capital eat them up.

Pricing may go up, but not for the right reasons. Not because of healthy demand, but artificially restricted supply. The housing market is fully manipulted by the banks.

Strange to see a free market guy like yourself cheer this on.