Editor’s Note – From the “who do you believe” category once again, we have two articles about housing, posted just a day apart. One is very upbeat, the next speaks to a double disappointment. Who can anyone rely upon anymore? The “experts” say and expect one thing, based on who knows what, and then the reports come out, and they were off, again, and again, and again!
People are investing in their futures, relying on business numbers, especially new home starts, and also, the single largest investment most people make is housing – is anyone held liable? The economists expected a 1.6% increase in sales, yet the report shows “signed contracts to buy new homes fell 8.4 percent”. Close one!!!
On July 24th, Steve Russilillo wrote in the Wall Street Journal:
“Home prices are turning upward, another clear indication that housing market is in the midst of a growing comeback”
Yes, new home construction starts were up, based on builder’s confidence, this before the new home sales numbers for June would be released the next day on Wednesday, this morning. “Economists are expecting a 1.6% advance from a month earlier.” (Read the rest below in article one.)
Sales of newly built homes fell hard in June, despite new found optimism in the housing recovery, especially among the home builders themselves. Signed contracts to buy new homes fell 8.4 percent from the previous month, according to the U.S. Commerce Department, although they are still up 15 percent from a year ago.
Sales levels are now at their lowest since January. This is the second miss for housing in the same month. Sales of existing homes fell as well, despite expectations for a gain. (Read the rest below in article two.)
Where did this new found confidence come from? How were the experts so off again? What numbers were they looking at? After all, builders do not speculate on thin air. The numbers must be all over the place, and “experts” must be reading tea leaves, because when the reports that matter come out – people have bet on the wrong horse. There is culpability here, and these “experts” have a lot of explaining to do.
How can you base decisions on the information available, whether buying, selling, or building?
Again, you be the judge:
July 24, 2012
By Steven Russolillo – WSJ Blog – Market Beat
The gradual recovery in the housing market continues amid more upbeat news this morning. U.S. home prices rose 0.8% in May from a month earlier, the fourth-straight monthly increase, according to the FHFA’s monthly index. Prices are up 3.7% on a year-over-year basis.
This report coincided with data from Zillow, which showed home prices in the second quarter rose from the year-ago period for the first time since 2007. “Home prices are turning upward, another clear indication that housing market is in the midst of a growing comeback,” wrote Joel Naroff, president and chief economist at Naroff Economic Advisors.
Here’s a handy-dandy checklist of areas within the housing market showing signs of improvement:
U.S. home building rose last month jumped to the highest level in nearly four years. June housing starts increased 6.9% on a month-over-month basis to 760,000. Compared with a year ago, starts are up about 24%.
New Home Sales:
New-home sales rose in May after falling for two straight months. Sales jumped 7.6% to a seasonally adjusted annual rate of 369,000, well ahead of economists expectations. Sales were up nearly 20% from a year ago and have been rising on a year-over-year basis for eight straight months.
On Wednesday, new home sales for June will be released. Economists are expecting a 1.6% advance from a month earlier.
U.S. home builders’ confidence in July notched its biggest monthly jump in nearly 10 years. The National Association of Home Builders reported its housing market index surged six points from a month earlier to 35, the highest level since March 2007.
Existing Home Sales:
This indicator actually showed some weakness in its most recent report. June sales of previously occupied homes slumped 5.4% from a month earlier, the lowest level in eight months. But sales are still up 4.5% from a year earlier.
The improvement in the housing market has been reflected in homebuilder stocks.PulteGroup is up 67% this year and is the second-best performer in the S&P 500.Lennar is up 54%, D.R. Horton has risen 48%, Hovnanian is up 74% and Ryland Group has gained 67%.
Builder stocks, measured by the Dow Jones U.S. Home Construction index, are up 47% this year, while the S&P 500 is up 6%.
Meanwhile on Monday, Goldman Sachs turned bullish on home builders. In a client note, the investment bank raised its ratings on several of the nation’s largest home builders, a signal for investors to give them a second look even after their sharp rallies this year.
S&P Case-Shiller Home Prices:
Home prices rose 1.3% in April , reversing seven straight months of falling prices. On an annual basis, the index was still down 2.2% from a year earlier. But this report, combined with the latest FHFA and Zillow data, suggests housing prices may have finally bottomed.
July 25, 2012
Sales of newly built homes fell hard in June, despite newfound optimism in the housing recovery, especially among the home builders themselves.
Signed contracts to buy new homes fell 8.4 percent from the previous month, according to the U.S. Commerce Department, although they are still up 15 percent from a year ago.
This is the second miss for housing in the same month. Sales of existing homes fell as well, despite expectations for a gain.
The biggest drop in new home sales came in the Northeast, down 60 percent month-to-month, but the Northeast represents the smallest sample and is therefore highly volatile. In May it was that same segment of the country that pushed new home sales higher. The biggest June gains were seen in the Midwest, with a slight gain out West, where dwindling supplies of foreclosed homes have removed some of the competition for the home builders.
“With new home sales at current levels 75 percent below peak and with a run rate near 50+ year lows, new home construction has bottomed, but there is still a long bridge between a bottom and a robust recovery, as existing home inventories (shadow and otherwise) remain elevated,” writes Peter Boockvar, an analyst at Miller Tabak.
These latest numbers fly in the face of rising home builder optimism and a huge run on the stocks of the public builders. Some analysts, however, have been warning that this recovery is fragile at best, given other factors in the economy, specifically lackluster job growth and poor consumer sentiment.
“Builder stocks have continued to outperform the market as demand has remained strong into summer; also, earnings and the next few macro data points should be positive,” wrote analysts at Deutsche Bank earlier this week. “However, we think downside tail risk is mounting for 2H12. It shouldn’t take more than muddle-through economic growth for housing recovery to continue, but the risks are that even that doesn’t happen or it happens unevenly against tenuous investor optimism.”
Several home builders reported big jumps in new orders this spring, but those orders did not translate into pricing power for the market. Prices of new homes fell 3.2 percent in June after several months of gains.
Single family housing starts rose 4.7 percent in June from the previous month to a four year high, but they are still running at about one third the historical average volume. Inventories of new homes for sale rose to 144,000, representing a 4.9 month supply, but that is still historically very low.