For months now there has been a bombardment of news, both good and bad on the condition of the housing market, as well as speculation as to what’s going to happen. Because of the quantity of articles and new stories produced, I decided to try to put the good news history over the last few months together and get a perspective of what the trend really is and make sense of it.
Below is the recent history of the key pieces of news that I believe have led us to a turning point in the housing market.
April 3, 2009 – Radar Logic reported that year-over-year decline in home sales went from (-36%) in 2008 to (-06%) in 2009. CEO Michael Feder said, “There appears to be a significant increase in demand given the reduction in prices evident in many markets”.
April 15, 2009 – National Association of Home Builders (NAHB) announced that Builder Confidence, as measured by NAHB/Wells Fargo Housing Market Index (HMI), had its largest one-month increase since May 2003. In response, NAHB Chief Economist David Crowe said, “this is a very encouraging sign that we are at or near the bottom of the current housing depression.”
April 23, 2009 – Radar Logic’s RPX Monthly Housing Market Report for February said that 13 of the 25 metropolitan areas covered by the report posted their largest month-over-month increases for the month of February since 2006. On the same day, the National Association of Realtors (NAR) announced that first-time buyers returned to the housing market in March. NAR Chief Economist Lawrence Yun stated the housing market “appeared to be stabilizing with modest ups and downs”.
April 28, 2009 – Standard & Poor’s released the S&P/Case-Shiller Home Price Indices (CSI) for February, and David Blitzer, Chairman of Standard & Poor’s Index Committees, remarked that “while the decline in residential real estate continued into February, we witnessed some deceleration in the rate of decline in some of the markets.”
The Indications of Stability Became Stronger in May
May 18, 2009 – NAHB announced that builder confidence increased again in April.
May 21, 2009– RPX Monthly Housing Market Report for March indicated that after the index had fallen continually throughout 2008, and had been virtually flat in February and March 2009, things are beginning to change. “While not a bottom, the stability in home prices we are seeing in certainly good news” (Michael Feder, CEO Radar Logic).
May 27, 2009 – The Federal Housing Finance Agency (FHFA) announced that the pace of decline in its purchase-only home price index had declined considerably. FHFA Director James B. Lockhart said “Our latest data are consistent with growing evidence that housing market conditions may be stabilizing in some parts of the country.” On the same day, NAR announced that existing home sales rose in April with strong activity in lower price ranges.
June Milestone (3 Months of Stability in the RPX Composite Index)
June 10, 2009 – The RPX Composite Index rose for the 3rd month in a row, and in a Bloomberg TV interview, Michael Feder said …we are now back at what would have been a logical inflated price for housing given natural forces…perhaps what we’ll see over the next several months is a real recovery.”
July 16, 2009 – NAHB announced that builder confidence increased again in July, and David Crowe said, “the market is bouncing around a bottom.”
July Milestone (3 Months of Consecutive Increases in Home Sales)
July 23, 2009 – NAR announced that existing home sales increased 3.6% in May, the third monthly increase in a row. Lawrence Yun, NAR’s Chief Economist said “This is another hopeful sign – if we can keep the volume of sales above the level of new inventory, prices could stabilize in many areas around the end of the year.”
July 23, 2009 – At the release of Radar Logic’s monthly report Michael Feder said, “At this point we are comfortable with the observation that RPX values in much of the country have bottomed, at least for now.”
July Milestone (4 Months of Consecutive Increases in the Case-Shiller Composite Index)
July 28, 2009 – Standard & Poor’s announced that the Case-Shiller composite indices had increased for the fourth consecutive month. David Blitzer said, “To put it in perspective, this is the first time we have seen broad increased in home prices in 34 months. This could be an indication that home price declines are finally stabilizing.”
The Seasonal Excuse
Some of the good news can be explained by regular seasonal trends that would indicate that April through May increases are to be expected. There are 3 pieces of good news here:
- Seasonal strength was largely absent in the spring/summer of 2008, but very apparent in 2009
- The increases in 2009 have lasted longer than would be expected by seasonal trends alone
- The increases in 2009 are greater than the average of what would be expected considering seasonal trends over the period 2000-2008
We are seeing much more consistent good news to indicate that we have hit the bottom of the market recession from a housing market perspective. The big question now is, how long will it take to come back to a respectable level?
That’s the million-dollar question, but at least now I believe we can somewhat comfortably say, “the worst is over.”