Housing hits a bottom

I do NOT agree with the article. I believe we may be at a bottom, but a bottom that will last until 2015, at least price-wise. All we are going to do is chug along the bottom with no appreciation at all. There will still be deal to be had for savvy buyers with good agents though.


Housing starts and sales expected to rise modestly in July

Housing, which led the economy into recession, may be one of the forces that helps to pull it out of the ditch. After 14 quarters of declining investment in homes averaging one percentage point of GDP per quarter, residential investments could actually add to the nation's gross domestic product in the third quarter, economists say. No one expects a renewed housing boom. But at least sales and construction spending aren't falling any more.

Signs of stabilization abound:

Home builders are gradually becoming more hopeful, even though surveys show most builders are still very discouraged. The builders' housing market index has risen in four of the past five months.

Housing starts have increased in four of the past five months after tumbling to a postwar record low. Building permits for single-family homes have risen at a 109% annual rate over the past three months.

Sales of new single-family homes have risen three months in a row after falling to a record low in March.

Sales of existing homes have risen four of the past five months, supporting by a government subsidy for first-time buyers and by sales of foreclosed homes.

Three of these key housing indicators will be released in the coming week, with the fourth arriving a week later. Economists surveyed by MarketWatch expect all four to continue to rise modestly. "Home sales and construction are still at low levels, but evidence is growing that they are past their lows and beginning to rebound," wrote economists for Moody's Economy.com. "Most influences on housing demand are still negative, but with the recession winding down it has become increasingly difficult to sustain the kind of weakness witnessed over the past couple of years." On the positive side: Prices have fallen, mortgage rates are relatively low, and first-time buyers are being subsidized. However, on the downside, jobs are still being lost, home prices are still falling, incomes are stagnant, and credit is still tight. The home builders' index will likely rise to 19 in August from 17 in July. The data will be released on Monday at 1 p.m. Eastern. The next day, the Commerce Department will report on July data for housing starts and building permits. The MarketWatch consensus calls for starts to rise about 2% to a seasonally adjusted annual rate of 596,000 from 582,000 in June. Builders are still deeply pessimistic as a group, but some are clearly finding it profitable to resume building, especially in areas that didn't overbuild during the boom. There are 281,000 new homes for sale, and it's taking nearly a year to sell a home built on speculation once it's been completed. Builders also have to worry about the inventory of condos and existing homes. "The excess inventory is gradually being absorbed," wrote David Greenlaw and Ted Wieseman, economists for Morgan Stanley. "However, the adjustment process will take some time to play out. So we look for only a modest pick-up in homebuilding activity over the near term."

Economists for Bank of America's Merrill Lynch believe starts have rebounded too quickly in recent months, given the massive inventory of competing homes on the market or waiting on the sidelines. They expect starts to drop to a 542,000 rate. The housing starts data are extremely unreliable on a month-to-month basis, with standard errors of more than 10%. However, the data become more reliable on a four-month average. The single-family building permits data are fairly reliable even on a month-to-month basis (standard of error of less than 2%). Sales of existing homes also seem to have found a bottom, but that may due more to artificial supports for buying than any fundamental strength in the market. In recent months, first-time buyers have accounted for a third or more of sales, helped by the government's subsidy. Distressed sales have also accounted for a large, but shrinking, share of sales. Economists think sales probably rose to a 5 million seasonally adjusted annual rate in July from 4.89 million in June.



For more economic news and information, please visit www.marketwatch.com

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