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
Investing in the Tulip Crypto Mania 2021 - 19th Jun 21
Here’s Why Historic US Housing Market Boom Can Continue - 19th Jun 21
Cryptos: What the "Bizarre" World of Non-Fungible Tokens May Be Signaling - 19th Jun 21
Hyperinflationary Expectations: Reflections on Cryptocurrency and the Markets - 19th Jun 21
Gold Prices Investors beat Central Banks and Jewelry, as having the most Impact - 18th Jun 21
Has the Dust Settled After Fed Day? Not Just Yet - 18th Jun 21
Gold Asks: Will the Economic Boom Continue? - 18th Jun 21
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
RAMPANT MONEY PRINTING INFLATION BIG PICTURE! - 16th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

U.S. Housing Market Recovery Forecast

Housing-Market / US Housing Feb 26, 2010 - 08:27 AM GMT

By: Mike_Larson

Housing-Market

Best Financial Markets Analysis ArticleI’ve been talking about interest rates an awful lot lately … and for good reason. The next BIG story in the bond market is clearly the sovereign debt crisis.

But I don’t want to ignore the housing market, either.


My best-case forecast is still a recovery — albeit an anemic, lackluster, moribund one. Some of the latest numbers leave a few questions in my mind, though. So let’s recap where we stand …

Price Declines Ebbing as Inventory Overhang Shrinks

Home prices have been plunging for a lot of reasons:

  • They got way too expensive relative to incomes.
  • The monthly cost of ownership got way out of whack with monthly rents.
  • The supply of homes for sale exploded, while the qualification standards for home mortgages tightened.

But many of those underlying issues have been corrected by falling home prices.

As I’ve told numerous reporters over the past couple of years, falling home prices were ALWAYS part of the solution to the housing crisis. They would eventually restore price-to-income and own-vs.-rent ratios back to their historical norms … and bring out bargain-hunting buyers.

Home prices are inching upward as inventory slowly declines.
Home prices are inching upward as inventory slowly declines.

Now you’re starting to see the results of that in the home price data. December figures from S&P/Case-Shiller show that prices rose 0.3 percent from a month earlier. That was the seventh straight gain.

Prices still fell from the year-ago level. But the 3.1 percent decline was the smallest going all the way back to May 2007. Prices actually rose in six cities, led by San Francisco at 4.8 percent and Dallas at 3 percent.

A key driver of this improvement is the shrinking supply of homes for sale, which I described for you a couple weeks ago. Total new and existing home inventories have shrunk by 1.4 million from their peak more than two years ago.

So that’s the good news.

What’s the bad news?

Sales Hit an Air Pocket; Will It Last?

New home demand hit a wall in January! Sales plunged 11.2 percent to a seasonally adjusted annual rate of just 309,000 units. That was much worse than forecast. In fact, it’s the lowest level ever recorded since the government began tracking in 1963 — when JFK was president!

Homebuilders are having a tough time competing with the existing home market.
Homebuilders are having a tough time competing with the existing home market.

The supply of homes for sale held around its four-decade low. But the median price of a new home dropped 5.6 percent to just $203,500 — the lowest level in more than six years.

What the heck happened?

For one thing, homebuilders are getting their clock cleaned by the existing home market. Distressed inventory continues to hit the market at cut-rate prices, drawing potential buyers away from new product.

For another, we’re still dealing with a tax credit “hangover” effect. And let’s face it, the job market is nothing to write home about, either. As I said earlier, I still think we’re on the long, slow road to an anemic, lackluster recovery in housing. But numbers like these can sure shake your faith.

Politicians will do whatever it takes to keep the housing sector afloat.
Politicians will do whatever it takes to keep the housing sector afloat.

The Likely Response? More Washington Subsidies!

The Federal Reserve has been saying it would stop buying Fannie Mae and Freddie Mac debt, as well as mortgage-backed securities, as of March 31. And the home buyer tax credit is currently scheduled to expire as of April 30 (for contract signings … you get until June 30 to close).

But let me ask you a question: Do you really think Washington is going to cut off its support of the housing or mortgage markets if the numbers keep coming in like this? I sure don’t!

I would not be surprised in the least if the government’s unprecedented intrusion and effective nationalization of the U.S. mortgage market continues as far as the eye can see.

That will likely keep sales and pricing from plunging to much lower lows. But it will also continue to pile more direct debt, indirect debt, and contingent liabilities on Uncle Sam’s balance sheet. That, in turn, raises the sovereign debt threat level.

Long story short, there are no easy ways out for housing or government policymakers. By failing to pro-actively attack the housing bubble years ago, they laid the groundwork for this epic economic disaster. And nothing but a long period of healing can truly fix things.

Until next time,

Mike

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.


© 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