Today's pending home sales report provides a glimmer of hope for the beleaguered housing market. The National Association of Realtors said pending home sales in October rose 10.4%, handily beating estimates of a 2% gain. Pending home sales are up more than 9% from a year ago.
One explanation for the increase could be the slide in home prices. According to Standard & Poor's Case-Shiller home-price index, September prices fell 0.6% from August and are down 3.9% compared to a year ago. The index, a widely followed gauge of the housing market, measures prices in 20 major U.S. metropolitan cities. Home prices in August were revised down to 0.3% from an initial reading of zero.
There's no question this is a buyer's market. Sellers are forced to take steep discounts on their homes and interest rates for 30-year fixed mortgages are at historic lows. On Monday The Daily Ticker discussed how renting has become extremely expensive compared to buying a home in a growing number of U.S. cities. In fact, it's never been a better time to buy a home in the past 15 years as it is now, according to a Wall Street Journal survey,
CoreLogic, a data analysis company, released its newest figures on the housing market: 22.1% or 10.7 million homes with mortgages were underwater in the third quarter — that is, the amount owed on the home is greater than the property's value. Last quarter was a slight improvement from the second quarter's reading of 10.9 million homes underwater, but it still raises the possibility of more foreclosures to come next year.
Fusion IQ's Barry Ritholtz sat down with Aaron to discuss the depressed housing market and the most recent S&P Case-Shiller numbers, which he said should come as no surprise.
Housing is "maybe in its fifth inning," he said, using baseball terms to track the progress of the housing market. A recovery can't be expected until there's been a "cleansing" — i.e. a clearing out of misallocated capital.
The bleak employment picture has also stymied a housing market rebound. Americans need to sell their homes — in most cases below the purchase price — before relocating for a new job. For those who can afford to purchase property, banks have become highly selective when approving mortgage loans.
Fed to the Rescue?
A Bloomberg news survey found that 16 of the 21 biggest bond dealers believe the Fed will buy $545 billion of mortgage securities — essentially another round of stimulus or "QE3."
The Fed already has $900 billion of home-loan debt on its books, but a focus on buying mortgage securities instead of Treasuries is a marked departure for Bernanke & Co.
Will another bout of stimulus bolster the distressed housing market? Share your thoughts below.
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