If you follow my commentary, you know that I am not a believer that the housing market has bottomed or has been in a state of recovery. Prices have remained under pressure and sales are overall lackluster.
The existing home market has been the laggard in terms of sales growth and prices over the past year when compared to new home sales. Yesterday’s positive surprise in new home sales added to the already improving sales trend in that side of the market, but that strength has not carried through to the majority of the space.
Even with the strength in new home sales, there is still an issue with prices. I always say that you can trade all the shares you want to, if prices are not rising, you are not making any money. It works the same when you have a bunch of sales, but nil or negative price movement.
The sales action seems to be driven by cash flush savvy investors snapping up all the super cheap, distressed inventory and either turning them into rental property or repairing them and sticking them back on the market for a profit.
Even though prices improved in the first quarter, the price change is still negative versus a year ago. April’s data indicated that on an annual basis home prices fell by 2.2% for the 10-City Composite and by 1.9% for the 20-City Composites, versus April 2011.
This is an improvement over the annual rates of -2.9% and -2.6% recorded for the month of March 2012 respectively.
Let’s also keep in mind that the new home market is but a small part of the total housing space. Existing home sales do not look as good; in fact, they have been on the decline over the past eight months. The Case/Shiller Data is a quarterly report that is lagging – The data we are seeing is up until April 2012. It also only captures about 75% of U.S. residential housing market and does not include condos (although they did show improvement in the quarter as well).
The weakness we are seeing right now in the existing home market could reverse the small increase we saw in the Q1 Case Shiller report.
The point is that we should approach this report with skepticism. The housing market is the U.S.’s biggest issue, perhaps at parity with the enormous budget deficit. If the Case- Shiller data was that good, why is the stock market not responding positively?
I am also curious if you all think that it is a great time to buy property in general or if you expect prices to fall further?
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