Housing | timiacono.com - Part 5

This Wall Street Journal story ($) charts the latest dismal housing data in the graphics below, that is, with the notable exception of home prices that continue their remarkable rise.

Many of the most recent dismal reviews on housing were prompted by the plunge in new home sales reported on Wednesday and it’s worth pointing out again that it is home building, not home prices, that have the biggest direct impact on economic growth.

Also see this New York Times story that, basically, echoes the same line of thinking.

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I must confess, I occasionally look at Zillow.com to get some idea about the value of our home, purchased here in Bozeman, Montana about three-and-a-half years ago, and was recently astonished to see its Zestimate at about 60 percent above what we paid.

Apparently, I’m not the only one who does this, at least based on the results of a new survey from Gallup (they’re really on a roll this week) from which the chart below was pulled.

As noted in the report, there are big differences in expectations based on where you live as some 72 percent of those in the West think home prices will rise versus only 44 percent in the East (the South and the Midwest are somewhere in between).

This is consistent with data last week (as noted here) where real estate is again seen as the best investment choice, overtaking gold, much to the surprise of stock and bond investors.

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New Home Sales Plunge 14.5 Percent

So much for the idea that, after an unusually severe winter that kept home buyers away, the spring housing market data would show a larger than expected rebound.

The Commerce Department reported(.pdf) that new home sales plunged more than 14 percent in February, from an upwardly revised annual rate of 449,000 to just 384,000 in March, the lowest pace in eight months. This represents a year-over-year decline of 13.3 percent, consistent with the report on existing home sales as detailed here yesterday.

This item at Bloomberg indicated the March sales total was lower than even the most bearish forecast by economists they polled and it has rekindled the debate over how soft the U.S. housing market has become as a result of investors stepping back from record purchases in recent years after home prices and mortgage rates had both risen sharply.

The months-of-supply metric jumped from 5.0 to 6.0 and the median sales price of new houses sold in March was $290,000, representing a gain of 12.6 percent from a year ago, while the average sales price was $334,200, up 11.2 percent from last year at this time.

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No Spring Rebound for Existing Home Sales

The National Association of Realtors reported that sales of existing homes fell 0.2 percent in March to a seasonally adjusted annual rate of 4.59 million units as there appears to have been no spring rebound in home sales after the severe winter weather that saw home sales slow sharply last December. Unfortunately for buyers, home prices continue to rise.

This marks the seventh time in the last eight months that sales have moved lower, a change in direction that came just after the Federal Reserve began talking about tapering their bond purchases, talk that led to sharply higher mortgage rates last year. Of course, that’s about the same time that Wall Street investors began to lose interest in the housing market, a sector that is now clearly facing headwinds.

On a year-over-year basis, sales are now down 7.5 percent, the biggest decline since the housing bubble burst, save for the periods in 2010 and 2011 when the expiration of government subsidies spurred buying surges and subsequent slowdowns.

In contrast to falling sales volume, the median sales price continued to rise, jumping from $189,000 in February to $198,500 in March. This puts home prices up 7.9 percent from a  year ago, consistent with the 6.9 percent annual price gain reported by the FHFA earlier today. Low supply was blamed for both lower sales and higher prices, though rising inventory pushed the months of supply metric higher, from 5.0 in February to 5.2 in March.

So far, at least, it is clear that weather wasn’t to blame for the recent housing market swoon.

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