If you are a buyer, the current housing market continues to afford good opportunities, whether as a principal residence or as an investment property. If you are looking for beachfront housing in Florida, there may not be a better time to buy than now. But then the housing market remains in a flux driven by high unemployment and record foreclosures.
It’s true that the housing market is much improved from a year ago, but there continue to be problems. The S&P/Case-Shiller Home Price Index of 20 major metropolitan areas in the U.S. continues to show declines, and my economic analysis is that this is not good.
The NAHB Housing Market Index, an indication of the sentiment of builders, continues to be well below the key 50 level. Any reading below 50 suggests negative sentiment amongst builders. It has not been since April 2006 that the NAHB index was above 50.
I remain somewhat bearish on the housing market in 2011 and into 2012. If you are a buyer, great; but sellers may continue to face lower prices.
However, there are some positive signs. The key Housing Starts for March were stronger than expected for the third time during the last four months. The March reading came in an annualized 549,000, well above the estimate of 520,000 and the revised 512,000 in February. And as far as the homebuilders go, Building Permits for March were strong at 594,000, above the estimate of 540,000 and the revised 534,000 in February.
The readings are encouraging over the past four months and we need to see this continue. But major hurdles are the continued high foreclosures and short sales in housing, along with declining home prices.
The housing market is improving and is better than where it stood a year ago, but I feel there will continue to be barriers as we move ahead.
Consider that a key driver of the housing market is jobs. We need jobs and security in order to give buyers confidence to assume a mortgage and not worry about losing jobs and missing payments. The jobs reading for March was positive, along with the drop in the unemployment rate to 8.8%.
So, while there continues to be sluggishness in the housing sector, we are seeing some encouraging developments. The housing sector will likely improve slowly with baby steps rather than a major leap forward. The worst is probably behind us and things will improve.