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Kevin Mahn
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  • Will This Now Be A Housing-Led Recovery? 0 comments
    Aug 21, 2012 12:05 PM

    The residential real estate market appears to have been one of the few encouraging areas within the U.S. economy during the 2nd quarter. While I observed many positive reports with respect to existing home sale prices, pending home sales, inventory and initial building permits, I still believe that it will take several years for the housing market to fully recover and work through the entire excess inventory that remains in the system. It is also very likely that pre-recession housing values may indeed prove to be the peak for many areas of the country for years to come. Regardless, the next leg of this economic recovery cycle may very well be led by the housing market.

    Three statistics that we, at Hennion & Walsh, generally review when we assess the housing market are existing single-family home sales and prices, inventory and months of excess supply as well as pending home sales. A review of these three data points, as provided by the National Association of Realtors® as of June 2012, shows that sales have increased from 1 year ago virtually in every region across the United States for existing single family home sales transactions over $100,000.

    % Change in Sales from 1 Year Ago
    Region $0-100K $100-250K $250-500K $500-750K $750K-1M $1M+
    Northeast 23.2% 20.7% 16.2% 12.3% 7.2% 9.4%
    Midwest -0.1% 13.5% 26.6% 21.7% 32.6% 3.4%
    South -6.6% 9.4% 13.4% 16.0% 11.4% 12.3%
    West -35.9% -2.5% 16.8% 20.1% 16.7% 15.4%
    U.S. -7.7% 9.1% 17.3% 16.6% 14.2% 12.3%

    Source: National Association of Realtors, June 2012

    Inventory levels fell by 3.2% in June while the months of excess supply have fallen by nearly 26% over the past year. While there remains over 6 months of excess supply in the system, the trend that has been developing over the past year is positive.

    Year Month Months Supply
    2011 May 8.8
      June 8.7
      July 8.7
      August 7.7
      September 7.9
      October 7.6
      November 7.3
      December 7.0
    2012 January 6.6
      February 6.3
      March 6.5
      April 6.2
      May r 6.3
      June p 6.4

    Source: National Association of Realtors, June 2012 - Seasonally adjusted supply/seasonally adjusted sales.

    While prior increases in sales activity were associated with a drop in prices, recent sales data seems to support stabilization in home prices, and even slight price increases in certain regions of the country on a year-over-year basis (Ex. Midwest and West). Across the U.S., the sales prices of existing homes have increased by nearly 8%.

     

     

    Sales Price of Existing Single-Family Homes
                           
    Year   U.S. Northeast Midwest South West U.S. Northeast Midwest South West
        Median Average (Mean)
    2009   $172,100 $243,200 $142,900 $155,000 $215,400 $217,000 $279,300 $168,700 $194,700 $261,100
    2010   173,100 243,900 140,800 153,700 220,700 220,600 282,200 170,700 196,500 270,200
    2011   166,200 237,500 135,800 149,300 204,500 214,300 277,000 166,900 192,800 256,500
        Not Seasonally Adjusted Not Seasonally Adjusted
    2011 Jun 176,100 259,300 146,300 158,400 210,600 227,100 296,100 179,200 206,800 264,100
    2011 Jul 171,700 244,600 146,700 157,000 195,500 221,200 286,900 179,000 203,000 250,600
    2011 Aug 171,200 239,300 142,100 154,100 211,300 219,800 280,100 174,500 197,500 262,800
    2011 Sep 165,400 226,300 136,400 148,900 211,100 212,900 268,500 165,400 189,700 263,000
    2011 Oct 161,100 222,700 132,800 144,200 201,700 206,400 260,700 160,900 184,100 253,400
    2011 Nov 164,000 238,700 133,000 146,500 202,800 210,700 275,200 162,300 188,000 254,300
    2011 Dec 162,600 218,900 129,400 149,600 207,800 209,800 261,500 158,800 192,200 257,100
    2012 Jan 154,600 226,800 121,900 137,800 192,300 201,000 268,100 150,500 178,600 245,000
    2012 Feb 156,100 223,800 120,500 141,700 197,500 202,100 264,900 148,100 181,200 250,300
    2012 Mar 165,100 231,800 132,200 150,700 207,800 212,500 271,000 160,100 192,600 260,000
    2012 Apr 174,100 233,900 140,600 156,800 228,400 222,200 273,800 169,100 201,200 277,400
    2012 May r 180,200 238,300 148,700 163,100 234,500 229,500 278,200 178,400 209,200 282,900
    2012 Jun p 190,100 251,800 159,000 169,600 239,000 239,500 293,200 192,400 217,300 288,400
      vs. last year: 8.0% -2.9% 8.7% 7.1% 13.5% 5.5% -1.0% 7.4% 5.1% 9.2%

    Source: National Association of Realtors, June 2012

    Continuing on a recent positive trend, as of June 2012, pending home sales in the U.S., on average, increased by 9.5% (seasonally adjusted) and 8.4% (not seasonally adjusted) respectively on a year-over-year basis with increases experienced across all four regions, with the slight exception of the West on a seasonally adjusted annual rate basis, of the country.

     

     

    NATIONAL ASSOCIATION OF REALTORS®
                           
    Pending Home Sales Index (PHSI)
                           
    Year   United States Northeast Midwest South West United States Northeast Midwest South West
    2009   95.0 76.8 88.9 98.5 110.0 * * * * *
    2010   89.3 71.2 80.3 97.1 100.7 * * * * *
    2011   89.9 67.5 80.8 98.0 104.2 * * * * *
        Seasonally Adjusted Annual Rate Not Seasonally Adjusted
    2011 June 90.7 68.3 80.5 97.6 108.2 108.7 89.4 96.6 124.5 111.9
    2011 July 90.5 67.9 81.0 96.6 108.5 94.0 69.1 78.9 106.9 108.9
    2011 Aug 89.6 65.2 79.2 97.5 107.0 102.8 71.2 82.7 108.7 139.5
    2011 Sept 86.9 62.9 75.0 94.8 106.0 83.2 51.4 71.1 84.9 118.2
    2011 Oct 92.6 69.9 87.0 99.9 104.8 90.1 67.6 83.0 91.8 112.3
    2011 Nov 96.9 72.3 90.1 102.9 113.7 81.1 53.1 69.7 81.6 114.2
    2011 Dec 95.1 72.7 91.6 101.3 106.6 63.8 39.8 58.5 72.7 74.1
    2012 Jan 97.0 78.2 88.1 109.1 101.9 78.2 54.7 69.9 84.6 95.0
    2012 Feb 97.4 78.8 94.1 107.7 99.4 90.8 71.1 97.6 98.6 86.8
    2012 Mar 101.1 78.2 93.3 113.4 107.8 115.3 97.6 110.3 132.5 107.3
    2012 Apr 95.5 79.1 93.0 105.7 94.9 112.3 103.6 117.3 125.6 93.1
    2012 May r 100.7 82.9 94.8 108.4 108.7 117.9 112.5 115.2 125.9 112.4
    2012 June p 99.3 76.6 94.4 106.2 111.5 117.8 101.4 113.0 133.8 110.4
      vs. last month: -1.4% -7.6% -0.4% -2.0% 2.6% -0.1% -9.9% -1.9% 6.3% -1.8%
      vs. last year: 9.5% 12.2% 17.3% 8.8% 3.0% 8.4% 13.4% 17.0% 7.5% -1.3%
                           

    Source: National Association of Realtors, June 2012

    Lawrence Yun, chief economist at the National Association of Realtors said in a June 27, 2012 release that, "The housing market is clearly superior this year compared with the past four years. The latest increase in home contract signings marks 13 consecutive months of year-over-year gains." This adds credence to my belief that brighter days lie ahead for the housing market in 2012, and our overall attraction to the Real Estate Investment Trust (REIT) asset class, as pending home sales are often viewed as a leading indicator of residential real estate activity.

    An improving housing market is critical for consumer confidence, and the economic recovery overall, as home equity still accounts for over 16% of household net worth according to Federal Reserve data as of the end of the second quarter of 2010.

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