Wednesday, August 15, 2012

Will We See Second Half Improvement, Part III; Housing

Let's continue our look at the possibility of a second half rebound by looking at housing.  We'll first look at new home sales, which account for a small portion of the real estate market.

Look at the data from the long term perspective, new home sales are still at very low historical levels.  However

Note the increase over the last 9 months, where we see an increase form a ~300,000 annual pace to an ~360,000 pace.

This is the chart that I find most important: new home inventory is not at very low levels historically.  That means builders will have to bring more inventory on line soon, which is exactly what we're seeing:

Building permits for i-unit structures are clearly increasing, and have been for about a year and a half.

Let's turn to the existing home market.

The overall sales sales pace has been pretty constant for the last two years.  Notice that this is in line with the historical norms of the early 1990s.

This, for me, is the defining chart of the housing market.  The overall months of supply is down to far more realistic levels in a months available for sale measurement and

and absolute amount of inventory measurement.

Also note that home prices are now rising:

Home prices rose for the fourth month in a row in May, suggesting the recovery in the housing market continued to gain traction, even as the broader economy wobbles.
The S&P/Case-Shiller composite index of 20 metropolitan areas gained 0.9 percent in May from April on a seasonally adjusted basis, topping economists' expectations for a 0.5 percent gain.

"Real estate continues to show improvement off the bottom. That's one of the few encouraging signs we've seen," said Subodh Kumar, an investment strategist at Subodh Kumar & Associates in Toronto.

On a non-seasonally adjusted basis, prices fared even better, jumping 2.2 percent. Compared to a year ago, price declines moderated to slip 0.7 percent, the smallest drop since the last time year-over-year prices rose in September 2010.