The big US data today was in the housing markets as we got both the Case-Shiller and the new housing sales numbers. Here’s my take on the news.
Both data sets were mixed. The Case-Shiller index showed the unadjusted Composite-20 index which I follow, falling year-on-year by 3.5%. This is a slight improvement over the previous month’s data when the decline was 3.9%. A lot of people have been calling a housing bottom. I think this is premature. However, the data do speak to some improvements. The question is whether these are weather-related or whether they portend a good summer selling season. The data were from February.
On the new home sales side, the data showed a slight downtick in the number of new homes purchased in March to the lowest in four months. But the prior month’s data were revised up substantially. This is the same type of mixed report Case Shiller showed. There are indeed some signs of life in the housing market but there is no indication that this is a sustainable trend.
What I would say however is this: if you listen to some housing bears, you can see chinks in their story. Take for example this analysis on Naked Capitalism. The story for Phoenix and Scottsdale actually sounds pretty bullish to me. It sounds like they have easily reached market clearing prices irrespective of whether rental prices fall. The bubble markets have come way down already. It’s markets like New York and Washington that have a long way to go. Buying beats renting hands down here. Sure these markets can (and may well) fall further but it looks like the beginnings of a buying opportunity in former bubble markets like Phoenix to me. They really can’t fall that much further. Whether the fall continues depends a lot on the real economy. I expect more price erosion during the next recession for sure. But even then, the rental yield is huge.
Just sayin’
That’s it. Here are the links.
P.S. – I would love to translate the foreign links for you but I have limited time. I think you should read them in Google Translate still because they are important.