Recent Housing Data Show A Real Estate Market Stuck On A Bottom

Includes: REZ
by: Tim Plaehn

A wide range of stats on the housing markets - both existing homes and new homes - were released over the last week. Now that all the housing news for the month is out, a review of the different data points gives an overall picture of the health of housing and real estate in the U.S. The results discussed here concern single-family housing results.

New Home Permits, Starts and Sales Data

In February, single family housing permits were issued at a 471,000 annualized basis, up 5 percent from the revised January number of 450,000. Single family housing starts for February were at an annual rate of 457,000, down 10 percent from the 507,000 rate in January.

For historical comparison, new home starts totaled 431,000 in 2011; 471,000 in 2010; 445,000 in 2009; and 622,000 in 2008.

Sales of single family homes in February were at a 313,000 annualized seasonally adjusted rate. The February sales rate was slightly lower than the January rate of 318,000 and up 11 percent from the February 2011 rate of 281,000. An average of the 12 previous, seasonally-adjusted monthly results puts the average monthly rate for the last year at 307,000 new single family homes sold.

Data from the U.S. Census Bureau. The Bureau website notes that new home sales will be below new home starts because starts includes homes built but not for sale. The number of new homes built for sale in 2011 was 289,000.

Existing Home Sales and Values

The February existing home sales annualized rate of 4.59 million was down slightly from January but up 9 percent from the 4.22 million home rate of February 2011. Annual sales for existing homes have stagnated between 4.19 million and 4.34 million for the last three years, with the high end of the range occurring in 2009.

The February pending home sales index was 96.5, down from 97.0 in January and 9 percent higher than the 88.4 rate recorded in January 2011. The index value for the full year 2011 was 89.9. The pending sales index uses the sales contract activity in 2001 as a base index value of 100.

The Case-Shiller 20-City Composite Home Price index reported a 3.9 percent decline in U.S. home values from January 2011 to January 2012. Both the 10-City and 20-City indexes reported by Case-Shiller are back to their 2003 levels. On average, anyone who purchased a home in the last nine years is at best break-even compared with the purchase price.

Data sources: National Association of Realtors, Standard & Poor


Home values and sales continue to bounce along a bottom, which has been in effect since late 2008. Home builders have scaled back their operations and production to be profitable at a 300,000 per year production level and even have some pricing power. However, 300,000 new homes a year is a far cry from the historic average of more than one million homes built per year.

Existing home sales are showing some life in early 2012, but unless prices start to show positive movement, the positive sales trend will be very short. Mortgage rates have also turned higher putting a further damper on any increased sales activity. A fourth year continuation of slow sales and home prices stuck 30 percent below the 2006 peak are not indicators of any type of positive housing results in 2012. Without a drastic change in the current price-to-loan value situation in the U.S. home values and sales will continue to be a drag on the economy. See my article: Cleansing Event Necessary to Turn Around Housing Market

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.