Mark Hanson delves even deeper into the housing data. It’s very hard to make an argument that sheds his superb analysis in anything other than a bearish light:
Year-to-date 2009 sales are 20k FEWER than 2008, one of the worst years on record. And we spent hundreds of billions to achieve these results.
From 30k feet, this is your housing recovery. What would have sales been without spending hundreds of billions on pulling out and forward demand from first time homeowners and investors?
Remember, organic move-up/across/down buyers have always led the market. First timers and investors have always been the weakest segments and cannot carry the market for long. This highlights the most important factor plaguing the housing market — epidemic negative equity prohibiting the typical homeowner from selling and re-buying. Epidemic negative equity is only fixed by ‘years’.
The tax credit extended the 2009 purch season a month (green) but as you can see from the MoM drop, seasonality reigns supreme. When this last push to get in before tax credit sunset, it sets the market up or a cash-for-clunkers effect over the near-term. If the credit is extended, it simply takes the pressure off and allows buyers to shop vs panic buy. Either way, the fundamentally weak housing market will show itself over the near term.Lastly, in today’s release Lawrence Yun commented on the falling prices saying that…“The national median existing-home price3 for all housing types was $174,900 in September, which is 8.5 percent lower than September 2008. Distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes in the same area.”But distressed sales were the lowest of the year at 29% from 31% last month due to HAMP and the lack of foreclosure inventory. Therefore, the median is actually being skewed higher as more orginic and short sales went off towards the end of the season.“Early information from a large annual consumer study to be released November 13, the 2009 National Association of Realtors® Profile of Home Buyers and Sellers, shows that first-time home buyers accounted for more than 45 percent of home sales during the past year. A separate practitioner survey shows that distressed homes accounted for 29 percent of transactions in September.“
Some of the best real estate analysis around. Thanks Mark!
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.