Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

U.S. Housing Market Stabilises, But Don't Expect an Rip-Rooaring Rebound

Housing-Market / US Housing Aug 28, 2009 - 09:26 AM GMT

By: Money_and_Markets

Housing-Market

Best Financial Markets Analysis ArticleMike Larson writes: Almost four months ago, I made one of the most dramatic shifts in my investment outlook ever. After warning — in advance — that we would experience a devastating housing and mortgage market crash … and after repeatedly refuting all the early — and wrong — bottom callers during the four-year collapse, I wrote the following in my Money and Markets column four months ago:


“It’s time to signal another important shift in my thoughts on the housing market. Namely, that the nexus of the real estate downturn is shifting and that the residential market is poised to stabilize in the coming quarters.”

I went on to say the market wouldn’t turn on a dime. My forecast: Home prices would continue to fall, but at a more gradual pace, while sales would gradually stabilize and inventory for sale would gradually come down.

So where do things stand? Do I deserve a passing grade?

Sales … Starts … Home Builder Sentiment? It’s All Telling the Same Story …

Here’s a brief recap:

  • New home sales rose 9.6 percent in July to a seasonally adjusted annual rate (SAAR) of 433,000. There were gains in three out of four regions in the country. Meanwhile, the raw number of homes for sale dropped to 271,000 — the lowest level going all the way back to 1993. And yet, median home prices were STILL down 11.5 percent year-over-year.
  • What about the existing, or “used,” home market? Sales gained 7.2 percent to a 5.24 million SAAR. That was the highest since August 2007. The number of homes on the market is still way too high, but it did fall almost 11 percent from a year ago. Prices were off 15.1 percent.
Construction of single-family homes is trending upwards.
Construction of single-family homes is trending upwards.
  • S&P/Case-Shiller home price index? Prices are down 15.4 percent from a year earlier in June. But that was an improvement from the 19 percent rate of decline seen a few months ago.
  • Housing construction? Everybody flipped over the fact that “headline” housing starts missed expectations in July. But the weakness was all in the multifamily (apartment, condo, etc.) segment. Construction of “core” single-family homes rose for the fifth month in a row, while permit activity shot up by almost 6 percent.
  • Home builder sentiment? Another good number. The National Association of Home Builders index rose another point to 18 in August, the highest since June 2008. We saw gains in three out of four regions of the country.

I’d call that a pretty decent fit with my May 8 forecast. Most importantly, for investors like you, I said you simply had to get out of the way if you were “short” the sector. The easy money, as they say, had been made.

The Philadelphia Housing Index (HGX), which consists of 19 home builders, construction suppliers, and mortgage-services firms, closed at 93.97 the day my piece was published. It’s up about 16 percent since then.

That’s all history. But it leads naturally to the NEXT question …

Where Do We Go From Here?

I think in the short term, a lot of the good news has been priced into the housing sector. So I wouldn’t be surprised to see industry stocks stall. We may even be in for another bout of weakness.

Why? Near-term home sales have been “juiced” by the $8,000 first-time buyer tax credit. That credit is set to expire November 30, unless Congress extends it.

Buyers have been running ahead of it and snapping up more homes than they otherwise would. It’s just like what we saw with auto sales as a result of the popular “Cash for Clunkers” program. We’ll likely see a “hangover” effect once the government-fueled sugar high fades.

As for the underlying market itself, I expect to see continued pressure on home prices — though again, the declines will be more gradual than we had in the past. The most important factor is still distressed inventory. We still have too much of it, and we’re going to get even more because borrowers are falling behind on their loans at record rates.

Mortgage Delinquency Rate Highest On Record!
4.3 Percent Of All U.S. Mortgages Are In Foreclosure Stage!

According to the Mortgage Bankers Association …

Arrow The overall mortgage delinquency rate jumped to 9.24 percent in the second quarter of this year from 6.41 percent in the same period of 2008. That’s the highest delinquency rate ever recorded (the MBA data goes back to 1972).

Arrow More than one in four subprime borrowers is now at least 30 days behind on payments. But it’s not just the crummy mortgages that are going bad. More than 6.4 percent of prime borrowers are also falling into delinquency.

Arrow Another 4.3 percent of U.S. mortgages were in some stage of foreclosure. In plain English, that means more than 13 percent of U.S. loans are in some stage of distress (either being paid late or already defaulted on). That’s the worst this country has ever seen!

There was something else noteworthy in the MBA numbers. In its … er … infinite wisdom, the government has NOT tightened the screws on Federal Housing Administration, or FHA, lending standards. You can still sneak into a home with weaker credit and a down payment of just 3.5 percent using FHA, even as private lenders have abandoned such generous terms. That’s driving FHA’s share of the mortgage market through the roof.

FHA delinquencies continue to rise. So will Washington force taxpayers to dip into their wallets again?
FHA delinquencies continue to rise. So will Washington force taxpayers to dip into their wallets again?

Unfortunately, it appears that FHA delinquencies are now starting to rise. The delinquency rate jumped to 14.4 percent in the second quarter from 12.6 percent a year earlier. Are we as taxpayers going to be asked to cough up even MORE money to bail out the FHA insurance program a year, two, or three down the road? I suppose only time will tell. But I’m not exactly brimming with confidence.

Bottom line: The housing market appears to have put in a longer-term bottom when it comes to sales and a longer-term top when it comes to inventory. Prices? Not so much, at least not yet.

As for any recovery, don’t expect a rip-roaring rebound. This is going to be more of a gradual process that will take a long time, kind of like turning a battleship.

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 .

Money and Markets 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