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(June 27, 2012) In technical analysis, an uptrend is indicated when a data series makes a higher high after a higher low. While some observers continue to argue that the housing market has not bottomed, or is going to crater again any day now, many housing market indicators have met the the technical analyst’s definition of what starts an uptrend. That does not mean that the pattern can’t fail– it can, and it may–but to deny that it has happened is to be in denial.
This in no way mitigates the fact that the banking system still has a huge cancer of massive inventory that it can’t liquidate at anywhere near what the banks carry it for on the books, and in many cases can’t sell at all.
On the other hand, the idea that there are massive numbers of marketable competitive properties out there that will hit the market any day now to drive prices lower is urban myth. The banks have good reason not to dump this inventory. It would further depress the market and impair the overall value of their collateral more than simply holding on to these bad loans and properties would. Furthermore, much of it is unmarketable. It would cost more to foreclose and sell than it would return in proceeds. So the banks will let these loans and properties rot in their portfolios, as they carry them at zero cost of funds, and gradually write them down. This is the purpose of the ZIRP Bernankecide that is killing the finances of so many old people in this country (I know because my mother is one of them). Kill the old people so that the banks may live and the mafia banksters get their skim.
9/26/12 (Note – August Pending Home Sales will be out on September 27, and will be updated at that time). Sales contracts for July (what the NAR refers to as “Pending Home Sales”) declined from June. The month to month decline of 8.2% was better than July 2011′s drop of 13.5%.
The year to year gain of 15% was a rebound from the June year to year gain of 8.4%. The annual rate of change had been between 10% and 15% since January continuing a string of consistent gains mostly in this range that began in March 2011.
The gains have been sustained for 16 months. It is reasonable to expect some fluctuation or weakening from time to time. The housing market does not move in a straight line. Unless mortgage rates rise significantly, say more than 100 basis points, then the gains are likely to continue at varying rates. Employment growth is low, but it’s enough at the margin to keep new buyers coming into the market and driving activity.
Furthermore, inventories continue to tighten. The inventory to contracts ratio was 5.6 in July, the lowest July level since before 2005. Last July, the ratio was 8.4. In July of 2010, it was 10.
Existing Home Sales – Updated 9/26/12 Existing home sales rose to 477,000 in August a gain of 47,0o0 from July, and 11% better than August 2011. The August gain was well above the average gain for the month of August of 15,000. The level of sales was better than every year since 2008.
Existing Home Sales Updated 9/26/2012
The NAR’s closed sale prices in August downticked from the July seasonal high. The median price remains 9.5% above the corresponding year ago period. Real time September listing prices as reported by Housingtracker.net are up just 2.2%. Listing prices have had less of a recovery because they were not as impacted by the presence of distressed sales. Sale prices in 2011 were heavily influenced by distressed inventory. There are fewer distressed sales in the mix in 2012.
New Home Sales – Updated 9/26/12
In the Wells Fargo- NAHB builders survey, builders reported improved sales and increased traffic in September. Both reached new recovery highs. The Commerce Department’s actual, not seasonally adjusted, data for August showed a downtick, which is normal for the second half of the year. The NAHB survey data is seasonally adjusted. They do not make the actual data public.
New home sales chart updated 9/26/2012. The usual seasonal downturn is under way but sales remain 24% above last year’s June level. The inventory to sales ratio is at its lowest level since 2005.
Prices rose sharply in August. New home sale prices are extremely volatile month to month, depending on the mix of price ranges going under contract. But median price was up 17% year to year, while the average price was up 13.9% year to year. Recovery in new home sale prices has caught up to the gains in existing home sales. Median new house prices remain above the prices of existing homes at $256,900 versus $187,400 (NAR) . Median new home prices are down only 2.2% from the March 2007 peak while existing house sales are still down 18%.
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