Housing Headache

by Ian Mathias.

The U.S. housing market is back to underperforming expectations. We saw the latest existing home sales and new home sales numbers this week — both failed to meet the Street’s forecast.

The National Association of Realtors reported 2.4% growth in existing home sales Tuesday, to an annual rate of 4.7 million. The stock market — no longer satisfied with meager housing growth — wanted a rate of 4.9 million and suffered a small sell-off.

Even though sales managed to increase in back-to-back months for the first time since 2005, existing home prices are still plummeting, distressed sales are still booming and the market is still saturated with a 9.6-month supply of homes… a positive sign that the free market still works, but hardly reason to call a bottom.

And new home sales are still slipping into the abyss. Sales of new houses fell another 0.6%, to a 342,000 annual rate, the Commerce Department said yesterday. That’s down 32.8% from last year — we hasten to add, a time when the housing market was already in the dumps. Making matters worse, Wall Street analysts were calling for a 2% rise in new home sales. And like existing home sales, the price of new homes is still falling (down another 3%, to $221,600), and inventory is still at a lofty 10-month supply.

Check out this chart of new versus existing home sales. Both have historically moved in near lock step, with the exception of last two years. If this trend is destined for a “regression to the mean,” we wouldn’t be surprised to see new home sales level out and existing sales take a turn for the worse.

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Ian Mathias is the managing editor of Agora Financial's Income Franchise, where he writes and researches about retirement, dividend and fixed income investing. Much of his work is featured in The Daily Reckoning and Lifetime Income Report, Agora Financial's flagship income investing advisory.  

Previously, Ian managed The 5 Min. Forecast, a fun, fast-paced daily look into the future of global markets and macroeconomics. He's also worked in public relations, where media outlets like Forbes, AP, Yahoo! and MSN Money have syndicated his writing. If he's not at work, you'll probably find Ian on a bicycle, racing up and down the "mountains" of Baltimore County. Ian has a BA from Loyola University in Maryland. 

  • The Real Deal

    Ian, you will do well to shy away from the ‘Street’s forecast, Street’s expectation’ mindset.

    Nobody living in a real world care about Street’s prognostications or sentiment anymore. People have begun to smarten up, and actually look a the real situation and think with their very own brains. Nothing clears stupidity and reset hubris like a good old depression. The Wall Street clowns can take a hike. Folks outside of that Kremlin will run things the way they see it.

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