Archive for the ‘real estate market’ Category
A healthy housing market is essential to economic growth in the U.S. economy. But despite what we are hearing from the media, the housing market rebound is facing major headwinds.
To start with, home prices in the U.S. housing market are nowhere close to their pre-crash levels. There are millions of homeowners in the U.S. economy whose homes are worth less than what they originally paid for them. From their peak in 2006, home prices in the U.S. housing market are still down roughly 30%. For millions of homeowners to break even on their home investment, home prices will have to go up by at least 40%.
We just learned housing starts plunged 16.5% in April from March. (Source: U.S. Census Bureau, May 16, 2013.) This decline in new housing starts was one of the sharpest declines since mid-2011.
The chart below depicts housing starts from 2001 to today. Notice the recent sharp decline in housing starts.
Chart courtesy of www.StockCharts.com
Housing starts may not be a very exciting number to some, but I follow housing starts to gauge consumer spending. Think of it this way: when a family buys a new home they need to buy things that are needed in the household—new furniture, appliances, lawn mowers, and so on. It is this spending that ultimately results in economic growth for the U.S. economy.
Construction spending in the U.S. economy is also on the decline. It registered an annual rate of $893.6 billion in December of 2012, and by March 2012, construction spending fell to an annual rate of $856.7 billion—a decline of four percent. (Source: Federal Reserve Bank … Read More
I’m talking about the housing market and the continued recovery taking hold. The housing market is well off its early 2009 lows and is striving higher on the chart.
The number of foreclosures across America is declining, and this is a good sign, as a high foreclosure rate tends to place downward pressure on home prices.
If you are looking at picking up real estate, you better do so soon.
As long as the Federal Reserve continues to pursue its bond-buying program and place downward pressure on financing rates, the housing market will continue to improve. It’s all about the Fed and the easy flow of money into the economy. (For more about how the Fed’s easy money policy has helped the rich, read “Higher Taxes: Who Cares? Not the Rich.”)
In March, a total of 152,500 U.S. properties were foreclosed, which was a 23% year-over-year decline—this also drove the number of foreclosures in March to 442,117 properties, representing the best month since the second quarter in 2007, when the mess in the housing market soon began. (Source: “U.S. Foreclosure Starts Edge Higher for Second Straight Month in March as Bank Repossessions Continue to Drop,” RealtyTrac, April 9, 2013.)
It’s clear the housing market is on the right path, but whether it can continue to be as hot as it has been is uncertain; my feeling is that the easy money has already been made.
And what has been impressive has been the housing market’s recovery in spite of the lack of a strong recovery in the jobs market, which continues to struggle along, as demonstrated by the … Read More
My cousin and his family had to walk away from their house in Arizona. There were no buyers, and they were underwater after the market crashed. The whole thing was really hard on them on all fronts, and they had to move. They’re in Colorado now, closer to family, with the ordeal behind them.
Like most things, timing is everything. In real estate, institutional investors are buying homes like crazy to rent out. The new housing boom is for rentals.
The Wall Street Journal wrote that The Blackstone Group L.P. (NYSE/BX) is buying homes at a rate of about $100 million a week, with institutional investors now making up a third of all cash buyers. Affordability for individuals is going to get squeezed.
On the stock market, homebuilder stocks continue to roar. Lennar Corporation (NYSE/LEN) reported excellent strength in its financial results.
According to the company, its fiscal first quarter of 2013 (ended February 28, 2013), produced revenue growth of 37% to $990 million. New orders grew 34% to 4,055 homes; the company’s order backlog grew 82% to 4,922 homes. Earnings for Lennar grew significantly to $57.5 million, or $0.26 per diluted share, compared to net earnings of $15.0 million, or $0.08 per diluted share.
On the stock market, institutional investors have bid the stock up 30 points since last October. (See “Stock Market Sinkhole: ‘It Didn’t Look Unstable’.”) It’s a stock market breakout for sure, but it’s based on fundamentals. Lennar’s stock chart is below:
Chart courtesy of www.StockCharts.com
Homebuilder PulteGroup, Inc. (NYSE/PHM) quintupled on the stock market over the last six months. Hovnanian Enterprises, Inc. (NYSE/HOV) … Read More
I may be the only one saying it: the rise in the U.S. housing market doesn’t look sustainable.
One of the most critical components of the housing market I follow is first-time home buyers. Why? As I have said many times in these pages, they are the ones who promote economic growth by increasing consumer spending after they make a home purchase; they buy furniture, appliances, audio/visual electronics, and more to fill the homes they buy.
Looking at the existing U.S. home sales for February, I see first-time home buyers accounted for only 30% of purchases in the housing market—that’s 6.25% lower than the number of first-time home buyers one year ago, in February of 2012. (Source: National Association of Realtors, March 21, 2013.) Until first-time home buyers pour into the housing market, I don’t expect it to go much further in terms of price increases.
With that said, the question arises: who is actually buying the homes and causing home prices to start increasing? According to the National Association of Realtors (NAR), the national median home price for all housing increased 11.6% to $173,600 in February of 2013 from last February.
Home prices have increased for 12 consecutive months now. They haven’t been big increases, but the last time the U.S. housing market witnessed this many consecutive months of price increases was from June 2005 to May 2006.
The reality is that it’s the investors who are buying up homes right across America.
While the number of first-time home buyers declined in February, investors accounted for 22% of all the existing homes purchases in the U.S. housing market. In … Read More
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