Housing Indicators Show Stability and Improvement Ahead of 2010 Selling Season

Friday, March 26, 2010

Housing is a hot button for many investors. They do not see how the housing market could improve this year, and a number believe prices could fall further.

Today’s write-up expands on yesterday’s article (“Housing Problems Are Dissipating and Fragmenting – Think About Buying“) by taking a look at housing’s indicators.

The following graphs show the key measures of the housing market:

First, existing home sales. At worst, the graph shows that sales have stabilized. The media’s focus on comparing to the stimulus-effected November peak (“For the third straight month, sales have declined!”) inaccurately depicts current sales as poor.

Second, new home sales. These are the lifeblood of homebuilders. Still down, but looking stabilized at the lower level. Because of the volatility of the monthly numbers, also shown are the quarterly data.

Third, permits for new homes. This is a leading indicator of homebuilders’ plans. The increases shown have two drivers: the reduction in excess inventory (fewer permits than sales as inventory is sold off) and the homebuilders’ expectations for the year.

Fourth, Case-Shiller home price index.The change from declining to stable is a sign that prices are appropriate for housing’s current conditions.

So… Although there are no “Eureka!” facts, the housing market has clearly improved from its negative conditions last year. Today’s better fundamentals are the foundation for 2010’s coming housing period.

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John Tobey on Seeking Alpha

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March 2010