Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):
FISCALLY FIT: How Low Will Home Prices Go? and Home Mortgage Rates Decline
Summary: WSJ personal finance writer Terri Cullen went house hunting with her sister in Monmouth Country, N.J. What they found: houses for sale on every block, declining house prices versus a year ago, vacant homes for sale (an indication that the original purchase was likely speculative), and a willingness among sellers and agents to consider offers dramatically below their asking price. Using her sister as a case study, Ms Cullen demonstrates that incomes haven't kept up with house prices, and with mortgage rates now rising, the affordability of a first time home is lower. Her sister's conclusion was anecdotally important: don't buy now, but wait until the spring. Separately, Freddie Mac reported that the average 30-year fixed rate mortgage rate fell by 0.4 percentage points last week to 6.43%.
Comment on related stocks/ETFs: Terri Cullen is an outstanding journalist, but her editor chose the wrong headline for this one. In no way does her article answer the question of how low house prices will go. At most, it suggests that savvy first time buyers should wait longer before buying. Andew Mickey argues that there's too much cash waiting on the side lines for the housing market to fall sharply. And recent Hitwise data suggest that August existing home sales data could surprise on the upside. If so, that would be good for the individual homebuilder stocks, including Beazer Homes USA, Inc. (NYSE:BZH), Centex Corporation (CTX), DR Horton (NYSE:DHI), KB Home (NYSE:KBH), Lennar Corp. (NYSE:LEN), Pulte Homes, Inc. (NYSE:PHM), Toll Brothers (NYSE:TOL) and The Ryland Group, Inc. (NYSE:RYL). Note that the SPDR Homebuilders ETF (NYSEARCA:XHB) started to rise recently. More analysis of the housing sector here.