Is Housing Information Helping the Economy?

The information of housing that was released with last month shows clear turning points within today’s market. Around five months back, it seemed like a low within the market of housing would be visible by the summer. In particular, sales figures had become so low, it looked like they could not keeping falling more.
The information that was released in July seemed almost completely positive. Brand new sales of homes went up by 11%, as inventories kept going on downward trends, rate of mortgage have stayed within low levels, while current sales of homes have escalated for the third month in a row. Even prices of houses showed a one-month increase ever since its peak in the year 2006. We say ‘almost’ completely positive since foreclosures are staying at high levels.

Now that clear evidence can be seen on housing bottoms, as well as several indications of moderate recoveries, one question remains: what would this mean for our economy?

Here is the information:

New sales of homes keep working from the inventory. Brand new sales of homes, which were essentially flat during the initial five months of the year 2009 at annual rates of 340,000, went up by 11% to around 384,000. Inventory keeps declining when it comes to both inventory months (it currently stands by 8.8 months, lower when compared to 12.4 months), as well as within terms of absolute numbers. The overall amount of units of 281,000 was almost cut in half out of the high 548,000 within the spring of 2007. Such a decline in inventory triggered upticks within permits of housing and begins residential construction of 13% and 22% off of the lows that were hit within the spring. It would be likely to go a lot of years prior to brand new home construction getting anywhere close to a million units yearly, which it passed within the boom era of housing; however, an improvement of depressed levels cannot be mistaken.

Current sales of homes are going back to levels of pre-Lehman. Current home sales increased for three months in a row within the month of June to around 4.9 million units on seasonally adjusted and annualized rates. Although this merely brings back sales to the level of early 2008, it still signals how the market is starting to clear up. Inventory within this area seems to have gone down, too. The existing inventory of homes for sale is at 3.8 million units, lower from last summer’s 4.6 million, representing around 9.4 months of inventory, lower from 11.2 months. This criticism is oftentimes mentioned: that the majority of this tends to be fueled by sales of foreclosure that reached 141,000 within June.

Current sales of homes seem to be increasing, even without sales of foreclosure. The actual sales per month of current homes have already been shown (not annualized or seasonally adjusted). It rings true that the January market lows have given at least 4 out of 10 sales derived from properties that were foreclosed. Within the month of June, this ratio was lower than 3 out of 10. The overall increase in sales of foreclosure has put the information of June way ahead of this exact same month within the previous year. Without foreclosures, the June sales of this year would be 11% less than the pace of last year. However, going back to the level of the previous year would be a step towards the proper direction, no matter what mechanism would be needed to actually get there.

                                                

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