The nascent recovery in the housing market took a half step back Wednesday as February existing home sales slid 0.9% to 4.59 million units vs. an expected rise to 4.61 million.
On the other hand, January's tally was revised up to 4.63 million vs. 4.57 million previously and February sales were up 8.8% from a year ago.
In sum, the data indicate "things are generally creeping along getting better," says Jonathan Miller, CEO of Miller Samuel, a NYC-based real estate appraisal and consulting firm.
The recent "boomlet" in housing stems mainly from pent-up demand after a sharp drop in the second half of 2011 caused by the debt ceiling debate in Washington and S&P's downgrade of America's triple-A credit rating, general turmoil in the financial markets, and fear over Europe's debt crisis, he says.
"I don't see this negative [existing home sales number] as sign we've peaked and we're falling but we're comparing against inflated numbers simply because of the release of pent-up demand from last fall," Miller says.
Generally, Miller believes housing is "pretty close to getting to a point where we're going to stop falling" but still finds it "mind-boggling" that some pundits are calling a bottom here, for two main reasons:
First, he cites the pipeline of "distressed" properties due to come back onto the market now that the foreclosure moratorium has been lifted and banks have reached a settlement with the Federal government and State Attorneys General over the 'robo-signing' scandal. (See: $26B Mortgage Settlement: Good for Banks, Not So Good for Homeowners)
"We don't get to recovery in the true sense of the word until we clear the market of the excess overhang of depressed sales, and we've got several million to go," he says.
Second, "credit remains very tight on the mortgage side," he says. "Low rates are falling on deaf ears."
Somewhat paradoxically, Miller believes the Fed's zero interest rate policy is making banks less willing to lend, not more, because the return on lending isn't worth the potential risk. Banks are "risk averse to the 'Nth' degree," he says. (See: Getting a Mortgage Shouldn't Be This Hard: Housing Finance Gets 'Taken to Task')
That said, Miller isn't wildly bearish on housing either, suggesting the distressed and non-distressed markets largely operate independently.
Foreclosures and short sales are "a very different product" from the non-distressed market, he says. "People falsely apply this logic that you take all the transactions, throw 'em in a bucket and that's the state of the housing market."
Similarly, people find it very tempting to make a macro call on the state of housing when, six years after the bursting of the national housing bubble, real estate is becoming a local phenomenon, again.
- Jonathan Miller