Warning: Declaration of action_plugin_safefnrecode::register(Doku_Event_Handler &$controller) should be compatible with DokuWiki_Action_Plugin::register($controller) in /home/public/dw/lib/plugins/safefnrecode/action.php on line 14

Warning: Declaration of action_plugin_blog::register(&$contr) should be compatible with DokuWiki_Action_Plugin::register($controller) in /home/public/dw/lib/plugins/blog/action.php on line 0

Warning: Declaration of action_plugin_blockquote::register(&$controller) should be compatible with DokuWiki_Action_Plugin::register($controller) in /home/public/dw/lib/plugins/blockquote/action.php on line 0

Warning: Declaration of action_plugin_include::register(&$controller) should be compatible with DokuWiki_Action_Plugin::register($controller) in /home/public/dw/lib/plugins/include/action.php on line 0

Warning: Declaration of action_plugin_popularity::register(&$controller) should be compatible with DokuWiki_Action_Plugin::register($controller) in /home/public/dw/lib/plugins/popularity/action.php on line 0

Warning: Declaration of action_plugin_redirect::register(&$controller) should be compatible with DokuWiki_Action_Plugin::register($controller) in /home/public/dw/lib/plugins/redirect/action.php on line 0

Warning: Declaration of action_plugin_captcha::register(&$controller) should be compatible with DokuWiki_Action_Plugin::register($controller) in /home/public/dw/lib/plugins/captcha/action.php on line 0

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656
The US housing boomlet [ClearOnMoney]
Top

Site

About
Contact

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656
Sitemap

Profile

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656
Trace:
The US housing boomlet

Reference

Main
Updates
Schedule

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656
Commentary

The US housing boomlet

19 Oct 2012 by Jim Fickett.

It is quite possible that both home prices and residential construction have bottomed and are now in uptrends. However beware stock euphoria based on presumption of a strong recovery.

With recent data suggesting that residential housing starts are coming up strongly, the news is full of articles gushing about the housing recovery. Here's Bloomberg:

Shares of Home Depot Inc. and Lowe’s Cos. – the two largest U.S. home-improvement retailers – are trading at the highest level in more than 10 years relative to the broader market amid signs the housing recovery is gaining momentum. …

New-home construction is the latest sign of improvement, as starts jumped 15 percent in September from the prior month to an 872,000 annual rate, based on data from the Commerce Department, beating the 770,000 median estimate of economists surveyed by Bloomberg News. …

Housing appears to be “turning a corner” in what’s shaping up to be a multiyear recovery, said Gary Balter, a senior analyst with Credit Suisse Group AG in New York. The data have been “pretty supportive that things are getting better,” which has helped boost shares of Lowe’s and Atlanta-based Home Depot, said Balter, who maintains “outperform” recommendations on both. …

Private-residential fixed investment, which includes spending on new-home construction and major replacements to existing houses, rose about 11 percent from a year earlier to an annualized $372.8 billion for the three months ended June 30. This was the strongest pace of yearly growth since 2005, according to data from the Bureau of Economic Analysis, which is scheduled to release advance third-quarter figures Oct. 26.

Well, sure, I can agree that “things are getting better”. It is probably true that residential construction has bottomed and is in an uptrend, and that prices may well have bottomed too. But let's not get too excited.

The news typically mixes two quite separate questions about the housing market. One is price and one is construction. Price is important to buyers and sellers. Construction is important for builders and the general economy. Price is closely correlated with available-for-sale inventory; construction is correlated with the vacancy rate.

While house prices may well now be in an uptrend, it is hard to see inventory getting really low and prices taking off while so many distressed properties continue to come on the market (Distressed properties will keep US house prices moderate for some time yet). Of course there are really many markets, and better neighborhoods way well see healthy price appreciation. But Bernanke will be more successful than I expect if prices take off nationwide.

Bill McBride of Calculated Risk follows the vacancy rate closely, and attempts to reconcile different sources of data. In August, he said,

[Frank Nothaft of Freddie Mac] is using the Housing Vacancies and Homeownership (HVS) and that survey is not consistent with other measures (like the decennial Census and the ACS). The Census Bureau is looking into the differences between the surveys, but I'm not confident in using the HVS to estimate the excess vacant supply.

However I do agree with Nothaft that “much of the excess vacant [inventory]” has been absorbed.

That does suggest that construction is turning up. However Lance Roberts of Streetalk Live does a good job of tempering current enthusiasm over a supposed coming boom in construction. In particular, neither lending data nor residential construction employment data show any evidence of a real upturn yet. And we are still at a very low level – even with recent increases in housing starts, their absolute level remains below the low points of the last several recessions.

While I don't expect a construction boom, it is that case that one could now construct a reasonable scenario for a multi-year recovery in construction, and do a rational valuation of home builders and construction supply companies on that basis. If you happen to see such a valuation, I'd be interested to hear about it.