Credit Suisse (NYSE:CS) has issued its monthly Real Estate Survey. The data from over 50 major markets across the United States indicates that buyer traffic has increased and home prices continue to soften.
For the third straight month, buyer traffic has increased. The level for January was the highest since April 2010 (the last month of the homebuyer tax credit). However, the buyer remains focused on bargains. This creates trouble for new homes, as homebuilders have not reduced prices by as much as existing home prices have fallen.
This is in stark contrast to several months ago, when new homes were selling on par with existing homes; evidently home owners to a large degree are now throwing in the towel and selling at what the market dictates. It is noted that much of the increased homebuyer traffic is in warm weather locations such as Arizona, California and Florida.
In addition to the above, positive trends are occurring in Charlotte, Dallas, Minneapolis, and Washington, D.C. As a whole, here is how buyer traffic stacks up over the past 12 months (50 is normal, below 50 graduated weaker, above 50 graduated stronger)
Buyer Traffic Index
Feb. 2010 -- 41.1
March 2010 -- 43.1
April 2010 -- 48.7
May 2010 -- 31.5
June 2010 -- 19.1
July 2010 -- 16.9
Aug. 2010 -- 17.0
Sept. 2010 -- 17.9
Oct. 2010 -- 16.3
Nov. 2010 -- 22.1
Dec. 2010 -- 29.1
Jan. 2011 -- 39.1
The Home Price Index sits at 26.9, compared with 43.4 in April 2010. This indicates a continued capitulation of sellers to rid themselves of property. The Time To Sell Index sits at 29,2 compared with 43.1 in April 2010. This indicates that it is taking longer to sell a home compared with April 2010, even at reduced prices.
My observation is that another avalanche of foreclosed homes will hit the market during March-June. This will add yet another reason to predict continued falling home prices. Homebuilders will continue to be squeezed between falling existing home prices and rising commodity costs that must be factored into new homes.
Investors who thought they were getting "deals" a year ago are learning the hard way that market forces are unpredictable. Most of these investors are likely to pause instead of doubling down, which may create even more downward pricing pressure.
Another issue will be inflation and home mortgage rates. At what point will investors or primary home buyers throw in the towel because of continued stringent stips and higher mortgage rates?
The Credit Suisse monthly Real Estate Survey is a dense, boots-on-the-ground compilation of local practitioners who have been shown to be an excellent predictive resource, based upon the success of this survey over the past few years.