Housing | timiacono.com

The Conference Board reported that consumer confidence reached a fresh seven-year high this month as Americans are increasingly optimistic about the economy in general and the job market in particular. The group’s confidence index rose from a downwardly revised 90.3 in July to a new recovery high of 92.4 this month as the present situation component jumped 6.7 points to 94.6. The expectations component dipped 1.0 point to 90.9.

Earlier, two reports indicated slowing momentum in the nation’s housing market as the Case Shiller Home Price Index showed declining year-over-year gains, down from 9.3 percent to 8.1 percent, and the FHFA reported price gains dropped from 5.5 percent to 5.1 percent.

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Housing Market Now Clearly Rolling Over

Via the latest data from Corelogic as detailed in this item at the Wall Street Journal economics blog come more reasons to think that the 2012-2014 surge in home prices has about run its course. Any investor (a key driver in the housing market rebound) looking at the graphic below probably isn’t thinking that now is the time to buy.

It seems the important question is whether they think now is the time to sell.

There are a growing number of anecdotal reports about investors and “accidental landlords” (those who rented out property in recent years rather than selling at a loss) who are cashing in. A good example is this Denver Post story where investors are said to be “selling like crazy”, all of which will make for an interesting conclusion to the summer.

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U.S. Home Price Gains Slow … or Reverse

Standard & Poor’s reported(.pdf) that U.S. home price gains have slowed dramatically in recent months and, on a seasonally adjusted basis, home prices have now declined for the first time in two-and-a-half years as shown below.

As the the non-seasonally adjusted data and the year-over-year data in this report traditionally receive more attention than the adjusted data, few news headlines are indicating (gasp!) U.S. home price declines, but that may soon change.

The 20-City Home Price Index rose 1.1 percent during the month of May, however, this is less than half the increase reported for the same month in 2012 or 2013. As is the case for home sales, seasonality plays a big role in home prices, and after adjustments are made the result is a decline of 0.3 percent in home prices.

On a year-over-year basis, both the raw and adjusted indexes showed a gain of 9.3 percent, however, this is down sharply from an annual gain of almost 14 percent six months prior.

While unadjusted data showed home price gains across the board during one of the strongest month of the year for price gains, some 14 cities in the 20-city index showed declines in adjusted prices, paced by a drop of 0.9 percent in Atlanta and a decline of 0.8 percent in Chicago. In April, the adjusted data showed only five cities with falling prices and, all told, this should serve as another warning sign of a faltering housing market.

Housing Starts, Permits Drop Sharply

The Commerce Department reported(.pdf) that housing starts and permits for new construction came in well below expectations last month, casting fresh doubt on the sustainability of the housing market rebound.

Housing starts fell 9.3 percent in June to a seasonally adjusted annual rate of 983,000, this coming after a drop of 7.3 percent in May that marked the worst two-month decline since late 2010, save for the sharp winter slowdown six months ago.

Building permits dropped 4.2 percent last month to a rate of 963,000 after a falling 5.1 percent the month prior, all but reversing the spring rebound.

From year ago levels, construction is still higher – up 7.5 percent for starts and 2.7 percent for permits – however, the recent trend should be disconcerting for anyone thinking that the construction industry was on a path back toward more normal levels as the latest readings are still nearly 50 percent below the pre-housing bubble norms.

In a separate report released yesterday, the National Association of Home Builders’ Housing Market Index rose to a six month high, due largely to an optimistic outlook for sales over the next six months.

In a survey where numbers above and below 50 indicate better or worse, respectively, the overall index jumped from 49 in June to 53 in July with the sales expectations component jumping 6 points to 64 and current sales rising 4 points to 57. Buyer traffic continues to be disappointing at just 39, however, it did rise 2 points this month.

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