The recession started in the housing market, so the recovery underway should include the housing market in some way, right? That makes sense, but hasn't happened yet.
Barclays Capital reported last Friday that the supply of foreclosed homes that banks need to sell is growing again. That overhang will put downward pressure on home prices, mostly in Arizona, California, Florida, Michigan, and Nevada. The supply of foreclosed homes peaked at 845,000 in November 2008, fell all of last year to 617,000 in December, but then rose 4.6% to 646,000 in January. Barclays thinks the figure will keep rising to about 733,000 in April before turning down again.
Tuesday, we learned that existing home sale purchases fell 0.6% to a 5 million annual rate, the third decline in three months and the lowest figure we've seen in eight months. The supply of previously-owned homes on the market spiked up almost 10% to 3.59 million. At the end of January, the supply of homes stood at 7.8 months. Now, it's up to 8.6 months.
This deterioration has fired up those calling for a double dip in the economy. If housing is slipping back into the mud, they contend, so will everything else until another shot of taxpayer-funded stimulus gooses the numbers higher again. Given recent warnings from Moody's and S&P about the possibility of the US losing its triple A credit rating by slipping too far in debt, the choice between a sinking economy and a sinking balance sheet will be a tough one. Well, it would be for anybody but the government, which seems to never find it tough to choose higher spending.
As counterpoint to the view that a double-dip recession is written between the lines of recent housing sector reports, I offer the following from James Altucher's article, "The Bears Are Dead Wrong," which appeared in the March 16 issue of the Wall Street Journal:
Compared to a year ago, home foreclosures are 6% higher now, but they're 2% lower than they were a month ago and their current year-over-year growth is its lowest since January 2006. The rate is decreasing, at last, and we could be nearing the end of the 50-month stretch of year-over-year increases. The Case-Shiller Housing Index has been rising for the past six months, hinting at stabilizing prices. Also, it could be an economic positive when somebody loses their home in the sense that they have more money to spend once they're out from under the mortgage burden.