Friday, August 21, 2009

All About Housing

The headline number on existing housing prices should be no surprise. The fact that the market surges on it is mind boggling but also no surprise. If you can rally like the market is going to infinity on bad economic data you can expect a surge on when the market gets a good headline number.

But a headline number is all it is. This was really a weak number looking out into the future. Incredible how an "efficient" market can be head faked so easily.

First of all, despite the huge effort to sell houses and supposed large increase in housing sales (I will get into this in second), inventory did not budge. You still stood at 9.4 months. You have to get down to at least 7 months of supply for housing prices to have a chance of a sustainable price move higher and really you need 6 months or less of supply.

Secondly (thanks goes Mark Hanson of M Hanson Advisors) you had a 16k increase in Northeast condo sales. You exclude that and month over month total existing home sales would have been down!!! In fact national house sales (taking out condos) was down month over month!!!! The western region was down 10% month over month!!!

Thirdly, this graph speaks volume. Once again thanks goes to M Hanson Advisors

This shows the percentage of foreclosure activity as it relates to sales. This maroon line does not represent actual sales. It represents foreclosure activity. Delinquency is a foreclosure activity. This represents a probable huge increase in overall housing inventory that is coming.

How people who manage billions of dollars can look at the headline number, not dig into obvious very poor data, and buy stocks is beyond me. You have a surge of first time buyer interest to lock in the housing purchase before the 8k government credit expires, much lower prices than a year ago, and this is all we can muster?? The speaks very poorly for housing prices over the next twelve months as we are way oversupplied and demand will begin to wane. It is incredible.

Like I said yesterday, the Case Schiller index comes out on Tuesday. This should also be a very strong headline number. This could mean another surge as Wall Street is in full buying panic/greed mode to the upside.

The absurdity of it all.

1 comment:

Carol said...

Housing that to nowadays is tough by looking at the cost!!!
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