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Current Market Conditions
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The Great Recession and the Housing Market
Existing
home sales were up 3.6 percent in June, while condo sales surged 14.0
percent. This has been the longest string of sales increases since
2004, quite a healthy upturn. Foreclosures
too
are looking less grim. According to NAR, distressed sales were 31% of
total sales in June, declining from the 45 % to 50% earlier in the year.
We
are beginning to absorb supply. Housing inventory continues to trend
down, declining 15.0 percent from June 08. There is an expected new
wave of foreclosures and many say it will get worse before it really
begins to subside, but we seem to be in a better position to absorb
inventory than before.
The housing market is showing clear signs
of stabilization. The Federal Housing Finance Agency Purchase Only
House Price Index rose .09% for the third month in a row. The price
trend is still not positive, but reflects a decline in the downtrend.
Bernanke testified that better conditions in financial markets have seen improvements in consumer
spending and the decline in housing activity has moderated. Moodys
Economy.com notes that Household credit conditions should improve
significantly by this time next year, based on a study of 7.5 million
credit files from Equifax.
The Feds Term Auction Facilities, which loan money to banks, is reducing its auction from 125 billion to 100 billion, big banks are in better shape.
The
Feds Bernanke expects positive growth in the second half of this year.
Unemployment will continue to rise even as the recovery takes hold. As
long as 70% of the economy is consumer based and we have a weak
consumer ours is a long and fragile recovery. In the 2001 recession,
unemployment did not peak until 18 months after the recession ended.
The
Conference Boards Index of Leading Indicators called the start of the
this recession and its now signaling the end of a 22 month recession.
If we did avoid the Great Depression, we did not avoid the Great
Recession. The prices of single-family homes in 20 major cities rose 1.4% in June,Thats two in a row. After three years of declining prices its a welcome reprieve. Prices rose in 18 of the 20 cities in June. I dont think of this as recovery yet, what we have is a bad situation looking a little better, but prices and growth are still negative. Its not exactly party time. Reminds me of a Billy Holiday tune....I been down so long it looks like up to me
Price Action
Homes down 15.4% year over year but better than the 19% year over year drop in January and 31% from the crest of the bubble topping out in 2006. More foreclosures and problems in the commercial sector will keep the lenders on the margins and without them either the Govt steps up with more stimulus or we will have a few flat years.
70% of our economy is Consumer driven and we arent ready or able to step up. The job loss spooks all of us and the fear of catching a falling knife is very strong. Besides, we arent as rich as we were.
What Does Shiller Have to Say
He is impressed with the turn around, but very cautious. Job loss, more foreclosures and a commercial property mix that is now as big a loan problem as homes. The commercial problem will continue to play out through 2010. Between now and 2012 most of the commercial loans made during the boom, when prices were at their highest, w2ill need to refinance. I cant imagine the banks are very happy to oblige. With the banks looking at large future loans, its fair to expect tight credit and this will keep growth low and slow. There are a few good articles on the apartment sector here
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