Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21
CISCO 2020 Dot com Bubble Stock vs 2021 Bubble Tech Stocks Warning Analysis - 6th Oct 21
Precious Metals Complex Searching for a Bottom - 6th Oct 21
FB, AMZN, NFLX, GOOG, AAPL and FANG+ '5 Waves' Speaks Volumes - 6th Oct 21
Budgies Flying Ability 10 Weeks After wings Clipped, Flight Feathers Cut Grow Back - 6th Oct 21
Why Silver Price Could Crash by 20%! - 5th Oct 21
Will China's Crackdown Send Bitcoin's Price Tumbling? - 5th Oct 21
Natural Gas News: Europe Lacks Supply, So It Turns to Asia - 5th Oct 21
Stock Market Correction: One More Spark to Light the Fire? - 5th Oct 21
Fractal Design Meshify S2, Best PC Case Review, Build Quality, Airflow etc. - 5th Oct 21
Chasing Value with Five More Biotech Stocks for the Long-run - 4th Oct 21
Gold’s Century - While stocks dominated headlines, gold quietly performed - 4th Oct 21
NASDAQ Stock Market Head-n-Shoulders Warns Of Market Weakness – Critical Topping Pattern - 4th Oct 21
US Dollar on plan, attended by the Gold/Silver ratio - 4th Oct 21
Aptorum Group - APM - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 3rd Oct 21
US Close to Hitting the Debt Ceiling: Gold Doesn’t Care - 3rd Oct 21
Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
Original Oculus VR HeadSet Rift Dev Kit v1 Before Facebook Bought Oculus - 3rd Oct 21
Microsoft Stock Valuation 2021 vs 2000 Bubble - Buy Sell or Hold Invest Analysis - 1st Oct 21
How to profit off the Acquisition spree in Fintech Stocks - 1st Oct 21
�� Halloween 2021 TESCO Shopping Before the Next Big Panic Buying! �� - 1st Oct 2
The Guide to Building a Design Portfolio Online - 1st Oct 21
BioDelivery Sciences International - BDSI - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 30th Sep 21
America’s Revolving-Door Politics Behind the Fall of US-Sino Ties - 30th Sep 21
Dovish to Hawkish Fed: Sounds Bearish for Gold - 30th Sep 21
Stock Market Gauntlet to the Fed - 30th Sep 21
Should you include ESG investments in your portfolio? - 30th Sep 21
Takeda - TAK - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 29th Sep 21
Stock Market Wishing Away Inflation - 29th Sep 21
Why Workers Are NOT Returning to Work as Lockdown's End - Wage Slaves Rebellion - 29th Sep 21
UK Fuel PANIC! Fighting at the Petrol Pumps! As Lemmings Create a New Crisis - 29th Sep 21
Gold Could See Tapering as Soon as November! - 29th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

How Will the Housing Market Affect the U.S. Economy in 2013?

Economics / US Economy Dec 21, 2012 - 09:38 AM GMT

By: InvestmentContrarian

Economics

Sasha Cekerevac writes: One of the most important sectors of the economy is the housing market. The housing market is crucial for several reasons. First, the housing market employs a lot of people, both directly and indirectly. This includes the direct employment of people in the housing industry, such as tradesmen and homebuilders, and the indirect employment of people in related industries, such as the automakers that build pickup trucks to be used by tradesmen and homebuilders.


Another crucial factor is the direction of home prices. We’ve now seen continued strength in home prices, which is a positive for the homeowner. Considering a house is the largest property many citizens own, to see its value continually decline is mentally and emotionally difficult. However, with month after month of steady gains, this will help alleviate some concerns about the future.

According to the latest report from research and analytics firm CoreLogic, Inc. (NYSE/CLGX), in October 2012, home prices, including distressed sales, jumped up 6.3% nationwide. This is the largest increase for home prices since June 2006. This was not a one-time jump for the housing market, but the eighth consecutive month of year-over-year nationwide increases in home prices. (Source: “CoreLogic Home Price Index Marks Eighth Consecutive Month of Year-Over-Year Gains,” CoreLogic, Inc., December 4, 2012.)

In regards to homebuilder sentiment for the housing market, which is correlated with home prices, confidence continues to rise. According to the National Association of Home Builders (NAHB), confidence by homebuilders in December rose for the eighth consecutive month. This is the highest level of confidence by homebuilders since April of 2006. (Source: “Builder Confidence Continues Improving in December,” National Association of Home Builders, December 18, 2012.)

The chairman for the NAHB, Barry Ruttenberg, stated in the release, “Builders across the country are reporting some of the best sales conditions they’ve seen in more than five years, with more serious buyers coming forward, and a shrinking number of vacant and foreclosed properties on the market.”

Following these comments, it is no surprise that the Department of Commerce’s release of building permits and housing starts was strong. For November 2012, building permits were up 26.8% from November 2011, and housing starts in November 2012 were up 21.6% from November 2011. (Source: “New Residential Construction in November 2012,” U.S. Department of Commerce, December 19, 2012.)

The low inventory in the housing market is creating increased demand, which is seeing higher home prices and an increase in building permits to meet this demand. The National Association of Realtors (NAR) released data for November 2012 detailing that total existing home sales, which are completed transactions, were running at an annual rate of five million that month. This was much stronger than expectations of 4.8 million, and reflects an improvement of 14.5% from existing home sales in November 2011. The national median existing home price was $180,600 in November 2012, up 10.1% from November 2011. (Source: “November Existing Home Sales and Prices Maintain Uptrend,” National Association of Realtors, December 20, 2012.)

How does a rebound in the housing market affect the U.S. economy in 2013? For the last few years since the Great Recession, the combined decline in home prices and the crash in the housing market in general have been a headwind and a large negative for America’s economy. We are now seeing month after month of positive news regarding the housing market. If this were only one or two months, questions would remain about the sustainability of the rebound. Considering the extended length and duration of the increase in the housing market off the bottom, home prices should continue to see relatively stable gains.

Note that I do not believe we will regain the previous highs in terms of home prices anytime soon; however, I do believe stability and reasonable growth will be attained. This will help drive many industries directly and indirectly related to the housing market. As I mentioned previously, pickup truck sales will be a benefactor, as well as various inputs into the housing market.

The rebound in home prices and growth in the housing market are impacting commodity prices. If I asked which of the 24 commodities tracked by Standard & Poor’s GSCI Spot Index was the strongest in 2012, I doubt many people would say lumber. But lumber prices have gone up 37% this year! Lumber prices have doubled since January 2009, and are now at a six-year high. (Source: “Lumber Reaches 6-Year High as Housing Rebound Erodes U.S. Supply,” Bloomberg, December 17, 2012.)

Clearly, the housing market rebound is here to stay, as home prices will continue to increase for as long as interest rates remain low. The real question will be: once interest rates start rising, how will the housing market react? Historically, a rise in interest rates is met with a difficult housing market sector.

Home prices are based on income, interest rates, and supply. In the current environment, income is not growing, but interest rates continue to be at multi-decade lows while rents are rising; combined with a tight housing supply in many markets, this is making buying a house a value proposition.

It will be interesting to see what happens in a couple of years, when interest rates are rising and the supply-demand equation is more balanced. If incomes aren’t rising then, we could potentially see home prices, as well as the entire housing market, take a hit. Until that point, the housing market will remain strong and will have a positive impact on the U.S. economy.

Source: http://www.investmentcontrarians.com/inflation/how-w...

By Sasha Cekerevac, BA
www.investmentcontrarians.com

Investment Contrarians is our daily financial e-letter dedicated to helping investors make money by going against the “herd mentality.”

About Author: Sasha Cekerevac, BA Economics with Finance specialization, is a Senior Editor at Lombardi Financial. He worked for CIBC World Markets for several years before moving to a top hedge fund, with assets under management of over $1.0 billion. He has comprehensive knowledge of institutional money flow; how the big funds analyze and execute their trades in the market. With a thorough understanding of both fundamental and technical subjects, Sasha offers a roadmap into how the markets really function and what to look for as an investor. His newsletters provide an experienced perspective on what the big funds are planning and how you can profit from it. He is the editor of several of Lombardi’s popular financial newsletters, including Payload Stocks and Pump & Dump Alert. See Sasha Cekerevac Article Archives

Copyright © 2012 Investment Contrarians - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Investment Contrarians Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in