Is the US Housing Market Stabilizing?
The release of housing start data on June 17 has sparked a furry of responses on the Internet. Some commentators are horrified by the increased number of housing start while others are seeing the data as a sign of real estate market bottom.
One side argues that the market is currently over-supplied with months of existing inventory to consume as well as hundreds of thousands of homes under foreclosure. Adding more supply to the market would only drive prices down further and create more chaos.
In the West, housing starts jumped and incredible 28.6%, followed by the South with a 16.8% increase and the Midwest with a 11% increase. In absolute terms, overall starts were at a seasonally adjusted annual rate of 432,000 in May vs 454,000 in April. However, reader of this data must bear in mind that April suffered a significant drop from March data.
Most of the national wide increase came from multi-unit structures (Condos and Apartments) which is a very volatile number. Comparing year over year data,multi-unit homes are still down 54.6% and single family start are down 40.9%. Hence it is difficult to call this short term rise in housing start a “rebound”.
“Residential real estate has finally found a floor”, Jim Cramer told CNBC viewers on Tuesday.
The cheering camp argues in addition of the jump in housing start, the Building Permits also showed encouraging increases.. The South and the West jumped 17% and 29% respectively. They believe the Building permits is a more accurate indicator to the market’s future. This camp is confidant that the government’s stimulus package, inflow of immigrants and capital from foreign bargain hunters will ease current condition and results could be seen as soon as the end of 2009.
Has the US real estate market turned around?
Despite the different reasoning of each camp, both sides agree that the housing start data alone may not imply a bottom in housing prices. But both sides agree the downward spiral of the US real estate market have eased in the near term and further data is needed to see if this temporary stabilization can be sustained.