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Friday, February 26, 2010

Housing Market Still Challenged (We Know), But - Again - No One Sees Positives

Another headline story on Yahoo! Finance (and elsewhere) stoking the fear factor:

Housing market shows weakness for 2nd month - Big drop in January US home sales show housing market could falter after federal support ends

The article opens with the following:
  • (AP) -- Sales of previously owned U.S. homes plunged in January to their lowest level since summer, providing fresh evidence that high unemployment and tight lending standards are outweighing the government's attempts to prop up the market.
  • The results, the weakest since June, were far worse than forecast and suggest the housing recovery will sputter without government support. The Obama administration has spent billions to keep mortgage rates low and give buyers tax breaks, but both programs are set to end this spring.
Is it a big surprise that housing is/was slow in January? "Normal" seasonality -- which we discussed last October here -- might suggest a slight M/M increase, but then again, winter months are always slow and bad weather across many regions might have impacted sales. And, yes, we think a special government tax credit ended last November.

Buried in the article, we find this POSITIVE data point:

Home sales are still up nearly 12 percent from the bottom (emphasis added), but are down 30 percent from their peak more than four years ago.

Let's dig just a bit deeper -- going directly to the source, the "NAR":
  • Existing-home sales fell in January but are above year-ago levels, according to the National Association of Realtors®.
  • Existing-home sales – including single-family, townhomes, condominiums and co-ops – dropped 7.2 percent to a seasonally adjusted annual rate1 of 5.05 million units in January from a revised 5.44 million in December, but remain 11.5 percent above the 4.53 million-unit level in January 2009.
SO, we're up from the same month one year ago and, thus, making positive progress. To us, this is more notable than fretting over a slight M/M decline and missing impossible-to-get-right monthly forecasts by economists. We understand we're not out of the woods yet and housing may remain under pressure into 2011, but few seem to consider the Y/Y increase. For excellent graphs and commentary on the housing market, we recommend visiting Calculated Risk.

Happy investing,

Jeffrey Walkenhorst
CommonStock$ense

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© 2010 Jeffrey Walkenhorst
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