Yeah! Housing Will Recover in Q1!

Monday, December 11, 2006 | 02:05 PM

Or so says the NAR:

"The worst of the U.S. housing slump is over, according to the National Association of Realtors.

Sales of previously owned U.S. homes will grow at an annual rate of 6.29 million in the first quarter, snapping five consecutive quarterly declines, the industry's largest trade group said today. New-home sales, about 15 percent of the market, won't recover until 2007's fourth quarter when transactions will grow to an annualized rate of 967,000 after bottoming at 944,000 in the third quarter, Chicago-based NAR said.

No word on whether the $40 million advertising campaign (It's a great time to buy or sell a home!) is having any impact on this so-called recovery.

David Lereah, NAR’s chief economist “Most of the correction in home prices is behind us, but general gains in value next year will be modest by historical standards.” Lereah did not offer any evidence for his statement.

Call it wishful thinking: In 2006, the inventory in new and existing residential homes for sale was at record high levels (inventory still remains dangerously high). And, Home prices have dropped far more than the reported by government or NAR statistics. That combination -- excess inventory and falling prices -- does not bespeak a bottom in the housing sector.

The NAR has not shown itself to be a particularly astute forecaster: They projected 2006 housing resales would be 6.84 million; In actuality, sales fell to 6.47 million units sold.

Calling the bottom in Real Estate has been a losing gambit this year. In addition to the NAR's chief economist, several other cheerleaders have erroneously called for the same, including former Fed Chief Alan Greenspan. They have so far been proven wrong.

Historically, Housing may still have further to go. According to Hugh Moore of Guerite Advisors:

"In the previous seven cycles since 1959, housing starts (seasonally adjusted) have fallen, on average, 50.7% from peak-to-trough. Each time housing starts have fallen more than 25% from their most recent peak, a recession has followed (except during the 'credit crunch' of 1966-67 that ended in an economic contraction, but not an 'official' recession)... Look at the chart below. Housing starts have dropped 34% so far since their peak in January of 2006. Just to get to the average drop we have another 20% or so drop in starts to go.



Real housing bottoms require more than wishful thinking; They require solid evidence, and more than mere price reductions. A significant decrease in inventory, plus motivated sellers, would go a long way to seeing a bottom form. So far, we have yet to see any evidence of that.


Existing-Home Sales to Trend Upward in 2007    

December 11, 2006

Existing-Home Sales In 2007 Expected To Recover From Cyclical Low
December 11, 2006

When Will the Housing Market Bottom?
John Mauldin
December 8, 2006

Housing Will Recover in First Quarter, Realtors Say
Kathleen M. Howley
Bloomberg, December. 11 2006

Monday, December 11, 2006 | 02:05 PM | Permalink | Comments (37) | TrackBack (2) add to | digg digg this! | technorati add to technorati | email email this post



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» Are We Not Men? from The Learning Curve
When will the housing market bottom? Barry Ritholz with some commentary. [Read More]

Tracked on Dec 11, 2006 8:39:02 PM

» Housing Market Bottom: Not So Fast Says Analyst from TAM Money and Finance
Barry Ritholtz, Chief Market Strategist for Ritholtz Research, isnt convinced the housing market is anywhere near a bottom. He calls the National Association of Realtors assessment wishful thinking. Ritholtzs biggest ... [Read More]

Tracked on Dec 11, 2006 8:57:53 PM


thinking of renting that property?

Posted by: KUROS | Dec 11, 2006 2:19:08 PM

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