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Has The Housing Recovery Hit The Skids Already?

  • Written by Syndicated Publisher No Comments Comments
    February 3, 2014

    New home starts plunged 9.8% in December. Permits for future starts fell 3.0%. New home sales fell 7% to 414,000, considerably worse than the consensus forecast of 455,000.

    Existing home sales in the 4th quarter were down 27.9% from the same quarter of 2012. Mortgage applications continued their sharp decline since last May, ending December at the lowest level in 13 years.

    This week it was reported that Pending Home Sales plunged 8.7% in December, to the lowest level in two years.

    Housing’s cheerleaders, mostly from within the industry, are blaming it on a lack of inventory, not enough homes available.

    That excuse doesn’t make any sense at all given that the average number of days a home sat on the market last month increased from 56 days to 72 days.

    A shortage of available homes for sale would have those that are available moving much more quickly, not significantly slower, if demand was still there.

    A more likely explanation comes from the National Association of Realtors ‘Home Affordability Index’. It has dropped to a five-year low, as incomes are not keeping up with increases in mortgage rates, home prices, and other home ownership costs. Forbes reports “experts predict the trend will continue in 2014”.

    Let’s hope the numbers begin to turn around, since the housing recovery was one of the strongest aspects of the economy last year, boosting household wealth and therefore confidence, and creating the biggest gains in jobs creation.

    Did the market find support in its correction or not?

    It looked like it might have, with the correction pausing early in the week, the S&P 500 closing at potential trendline support on Wednesday, and then surging up strongly on Thursday in reaction to the 4th quarter GDP growth report.

    But it gave that gain back and more yesterday.

    Yet has anything really changed?


    To read my weekend newspaper column click here: Bonds Are Defying Dire Forecasts

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    About The Author – Sy Harding, Street Smart Report

    Sy Harding publishes the financial website Street Smart Report Online and a free daily Internet blog at Sy’s Free Blog. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!

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