Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

Housing Market Still Feeling the Pinch

Monday, April 28th, 2008
By for Profit Confidential

There is nothing new in the depressed housing market except that it continues to be worrisome because of its negative impact on consumer wealth and spending. The National Association of Realtors just released data that pointed to a weak March for sales of existing homes, with the median price of a home declining 7.7% in March compared to the previous year. According to the data, the March decline was the second worst since records were first kept in 1999. The price of existing homes has now fallen for seven straight years, and you know this is no good.

I have friends down the street from me who are trying to sell their home and there is much less activity and walk-throughs now than in previous years. The areas recording the largest decline in price was the Midwest, down 6.5%, followed by a 3.5% decline in the South. The Northeast bucked the trend and saw prices jump 4.6% year-over-year.

As far as new homes go, they also fell in March to a 16.5-year low, with the median price of a home declining by 13.3% in March. The news will not help homebuilders, who are at the mercy of the housing and credit markets.

The soft housing markets are impacting the wealth and consumer spending in what is called the “poverty effect.” When housing prices decline, homeowners believe they are poorer and hence spend less, and this impacts the economy. Lower prices translate into less material wealth and this negatively impacts the way homeowners spend, especially in regards to bigger ticket items.

My feeling continues to be that the ripple effect from the housing market may continue to spread unless we see some stability in the credit and housing markets. The credit and housing markets are not improving and could get worse. Foreclosures are at record highs across the nation and homeowners are beginning to be scared, as evidence by the declining consumer confidence sentiment.

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George Leong - Financial Planner, ConsultantGeorge Leong, B. Comm. is a Senior Editor at Lombardi Financial, and has been involved in analyzing the stock markets for two decades where he employs both fundamental and technical analysis. His overall market timing and trading knowledge is extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi’s popular financial newsletters, including The China Letter, Special Situations, and Obscene Profits, among others. He has written technical and fundamental columns for numerous stock market news web sites, and he is the author of Quick Wealth Options Strategy and Mastering 7 Proven Options Strategies. Prior to starting with Lombardi Financial, George was employed as a financial analyst with Globe Information Services. Add George Leong to your Google+ circles