Housing Worsens

The recession started in the housing market, so the recovery underway should include the housing market in some way, right? That makes sense, but hasn’t happened yet.

Barclays Capital reported last Friday that the supply of foreclosed homes that banks need to sell is growing again. That overhang will put downward pressure on home prices, mostly in Arizona, California, Florida, Michigan, and Nevada. The supply of foreclosed homes peaked at 845,000 in November 2008, fell all of last year to 617,000 in December, but then rose 4.6% to 646,000 in January. Barclays thinks the figure will keep rising to about 733,000 in April before turning down again.

Yesterday, we learned that existing home sale purchases fell 0.6% to a 5 million annual rate, the third decline in three months and the lowest figure we’ve seen in eight months. The supply of previously-owned homes on the market spiked up almost 10% to 3.59 million. At the end of January, the supply of homes stood at 7.8 months. Now, it’s up to 8.6 months.

This deterioration has fired up those calling for a double dip in the economy. If housing is sliding back into the mud, they contend, so will everything else until another shot of taxpayer-funded stimulus gooses the numbers higher again. Given recent warnings from Moody’s and S&P; about the possibility of the US losing its triple A credit rating by slipping too far into debt, the choice between a sinking economy and a sinking balance sheet will be a tough one. Well, it would be for anybody but government, which seems to never find it tough to choose higher spending.

As counterpoint to the view that a double-dip recession is written between the lines of recent housing sector reports, I offer the following from James Altucher’s article, “The Bears Are Dead Wrong,” which appeared in the March 16 issue of the Wall Street Journal:

Compared to a year ago, home foreclosures are 6% higher now, but they’re 2% lower than they were a month ago and their current year-over-year growth is its lowest since January 2006. The rate is decreasing, at last, and we could be nearing the end of the 50-month stretch of year-over-year increases. The Case-Shiller Housing Index has been rising for the past six months, hinting at stabilizing prices. Also, it could be an economic positive when somebody loses their home in the sense that they have more money to spend once they’re out from under the mortgage burden.

This entry was posted in Uncategorized. Bookmark the permalink. Both comments and trackbacks are currently closed.
  • The Kelly Letter
    A Complete Investment Management System
    The Kelly Letter  every Sunday morning by email.
    Like no other. Many subscribers say this is the best read of their week, astonishing in its ability to distill seven days of noise into one succinct overview of the very few items that might matter. Start your Sundays right!
    A one-page Quick Start Guide
    with page number references to full information in The 3% Signal. You'll receive access to this right away so you can begin transforming your portfolio into a performance machine immediately.
    The 3Sig Calculator.
    A thing of beauty! You'll use it to generate your own personal signals every quarter including exact share amounts to buy and sell based on your account balances. It emails you the results to make later quarters easy by keeping last quarter's numbers at your fingertips. Some subscribers say this tool alone justifies their subscription price.
    The subscriber-only section of this website
    where likeminded investors are commenting on notes and discussing in forums. Jason joins these interactions every day. They're a treasure trove of investing tips and wisdom.
    The archive of Kelly Letter notes.
    It’s a research center, searchable and smartly tagged to make gathering time-stamped material on covered subjects easy.
    The subscriber podcast.
    Jason reads every letter word-for-word. This feature was requested by subscribers who prefer audio learning. They listen on their Monday morning commute, during a workout, or while reading along at their computer.

    Save 17%

    Pay as you go
    Or sign up to receive free email and learn more about the system.
Bestselling Financial Author