The stock market is near all-time highs but the parent company for major US real estate brokers is down since May. Is there bad news ahead in housing?
Housing prices are poised to move up in 2014, according to Lawrence Yun, chief economist at the National Association of Realtors (NAR). This will happen in part because the housing supply remains relatively low.
Data from the Federal Reserve Bank of St. Louis show there's about five months of housing inventory in the market today, roughly where it was eight years ago. That is, it will take five month to sell off all the homes on the market right now given the current pace of transactions.
From 1963 until 2005, that number averaged slightly less than six months; the average from 2000 to 2005 was four months. From 2006 to the housing peak in the second quarter of 2007, inventories actually inched up to around eight months. Inventories peaked at just over one year's worth of listings at the beginning of 2009, when the credit market dried up. Today, not only are inventories where they were in 2005, housing prices are also at those levels, according to US Census data.
Existing home sales are expected to rise by 10% to 5.13 million by year's end and stay there in 2014, says the NAR. While they see median home prices rising 11% to $197,000 in 2013, they believe prices will grow at a slower pace of 6% next year.
What does that mean for the housing market in general and for real estate brokers in particular?
Steve Cortes, founder of Veracruz TJM, believes interest rates will factor into improved conditions for the housing market.
"Lately, interest rates are starting to head lower again," says Cortes. "I think that is a positive sign for housing-related stocks."
While Cortes thinks home builders will continue to suffer, he believes brokers will do well, particularly Realogy. The parent company of several of the largest real estate brokers like Century 21, Coldwell Banker, and Sotheby's was spun off from Cendant in 2006 and went public a little over a year ago.
However, Talking Numbers contributor Richard, Ross, Global Technical Strategist at Auerbach Grayson, is wary of Realogy's charts. Ross sees the stock as unable to break above its downtrend or its 100-day moving average and is currently staying within a trading range.
"It's kind of a head-scratcher," says Ross. "Housing [is] particularly weak even as the broader market goes higher. That's telling me something, that perhaps the housing market is not as healthy as you might otherwise believe."
To see more of the analyses by Cortes on the fundamentals of housing and Ross on the technicals for Realogy, watch the video above.
More from Talking Numbers:
- Real Estate
- real estate brokers
- housing market