New Home Market Coming Back?

posted at 10:31 am on April 28, 2012 by Jazz Shaw

Almost exactly one month ago we looked at some disturbing dips in the new home sales market and a corresponding drop in stock prices in the construction sector. The plunge had followed a few months of anemic, but at least slightly positive gains in that market. I finished the story with the following question:

So what does this mean for the coming year? (I’m honestly asking here because I’m obviously no economist.) Is housing in a sustainable period of recovery and this month’s plunge is just a glitch? Or is the market going back into retreat?

Well, we’re now nearly into the month of May and according to Business Insider the numbers seem to be changing course yet again and at least hinting at a continuation of the previous, positive trends. April is looking up a bit.

Home Sales Chart

In early April, it looked like investors had obviously been drinking too much Kool-Aid, and that the pain would continue.

But! Housing is actually showing a pulse.

This week, Northern Trust’s Asha Bangalore went through some of the charts showing recovery.

Sure it’s modest, but the trend in new homes sales is going in the right direction…

It’s too early to get excited or sound the all clear. But it’s a very good sign that the hiccup we saw last month didn’t continue. And if the positive trends continue, it will be very bullish for the economy overall.

We could certainly use some good news, and housing is one of the slowest, most ungainly numbers to get moving in the right direction. But it’s springtime… traditionally the time of year when construction picks up in the Northeast and Midwest. Could this just be a predictable seasonal bump as builders head out into the field? I decided to contact BI’s own Joe Weisenthal to ask.

You always have to watch out for seasonality when it comes to housing, but the data from the government is generally good at adjusting for it. One easy way to see if there’s a seasonality issue in the data is to just look at year-over-year numbers, and generally (with the exception of actual prices) things are looking much better than they were a year ago. Of course, the warm winter may have played a big part in that, although if that had been the case, March numbers would have been much better. As it is, March was a bit weak, but April is looking better. The good news is that nothing is pointing down. Now we just need to see some consistency on the upside.

The original linked article includes charts of the stock market associated with new home construction and the curve seems to be bending in the same direction. I tend to be pretty cautious when it comes to getting my hopes up over the housing market. (Just looking at what happened to my place’s value is enough to give pause.) But this trend – with the obvious exception of March – now dates back roughly six months, so I’m almost ready to start having a little hope here. Real estate – both commercial and residential – is one of the lynchpins of the economy over the long run and any possible recovery was never going to look very solid until the market stabilized. Is this a sign that the market has finally reached bottom and is beginning to turn around? Keep your fingers crossed.


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Trust me on this; The market is not getting better. In fact, this is the worst market I’ve seen since the condo crash in the late ’80′s.

KMC1 on April 28, 2012 at 10:37 AM

Keep dreaming. The gates on 2012 foreclosures haven’t opened yet. And since when does recent market data come into play in projecting new home sales?

BKeyser on April 28, 2012 at 10:40 AM

How can it be improving when there are millions of foreclosures that haven’t been processed?

aniptofar on April 28, 2012 at 10:40 AM

And beyond the fact that there are millions of homes yet to foreclose
over a million people who bought homes in last 2 years are already UNDER WATER

RWGinger on April 28, 2012 at 10:47 AM

Improvement is a relative position.

It’s slightly better from a total disaster.

gerrym51 on April 28, 2012 at 10:48 AM

Home prices continue to fall and are projected to fall more. To buy a newly constructed home in most of the country means you are buying property at prices which will soon have the property underwater.

Who is writing this tripe?

DVPTexFla on April 28, 2012 at 10:56 AM

Keep dreaming. The gates on 2012 foreclosures haven’t opened yet. And since when does recent market data come into play in projecting new home sales?

BKeyser on April 28, 2012 at 10:40 AM

This is true. The bottom isn’t here yet.

Curtiss on April 28, 2012 at 10:59 AM

Is this a sign that the market has finally reached bottom and is beginning to turn around? Keep your fingers crossed.

Are you serious? Why would I cross my fingers hoping for a rebound with the election 7 months away?

Should we cross our fingers and hope that the jobs come roaring back and the GDP soars to 4-5% this summer too? Just in time for another 4 years of Obama.

We have suffered through 3 and half year of this disaster. I can hold out another 7 months. Thank you very much.

kevinkristy on April 28, 2012 at 11:00 AM

UNEMPLOYED people don’t buy houses.

GarandFan on April 28, 2012 at 11:02 AM

The few that now qualify are buying new but it was just reported that over the last 2 years some of these are already underwater. The bottom has not been reached yet. Employment must go up before the we bottom out.

tim c on April 28, 2012 at 11:06 AM

The price of existing homes continues to drop, which definitely won’t help the new home market.

bw222 on April 28, 2012 at 11:12 AM

We’ll never see the bottom until the banks start moving all the foreclosed inventory they are sitting on…

Until FIRST TIME HOMEBUYERS start purchasing homes, it is NOT going to get better anytime soon…

Time takes time, and that is NOT GOOD for Obama…

Khun Joe on April 28, 2012 at 11:14 AM

Meh. Existing home sales market is what? I know the market here in Toledo is sluggish at best.

rbj on April 28, 2012 at 11:22 AM

I don’t think it is improving. People who bought homes last year are already underwater in some areas!

And I’ve read more bad news saying that prices will continue going down.

Why would anyone buy yet?

CoffeeLover on April 28, 2012 at 11:23 AM

Jazz, we are expecting a tsunami of foreclosed properties to hit the market shortly as the banks must dump their inventory and complete the foreclosures of loans long in default.

While I sincerely wish this market and the economy in general would improve, I must realistically say it will not happen. Every single real data point shows we are in serious trouble and no amount of wishful thinking from the dems is going to change that.

dogsoldier on April 28, 2012 at 11:26 AM

… and jobs… People aren’t going to buy homes until they are secure in their jobs… which is not likely anytime soon in this era of the ObamaEconomy… ask the 17% who are the REAL unemployed… they’ll tell you…

Khun Joe on April 28, 2012 at 11:31 AM

TWO YEAR BACKLOG

faraway on April 28, 2012 at 11:32 AM

The 62% of Americans who say they own their own home marks a new low since Gallup began tracking self-reported homeownership in 2001.

The current level of homeownership marks a decline from 68% in 2011. For most of the prior decade, roughly seven in 10 Americans reported owning their own home. While the recession and financial crisis took place in 2008-2009, homeownership rates didn’t begin to reflect the bursting of the housing bubble until 2010, when 65% of Americans reported owning their own home — the lowest level recorded before this year.

Rebar on April 28, 2012 at 11:36 AM

I’m an Indiana real estate broker, been in the building and real estate biz since 1976, I’ve seen this movie before so to speak, trust me, a “blip” on the radar makes a good headline, real life is much different.

Buckle up, we’ve got a long bumpy road ahead. Blips like this are simply small surges in pocket markets to satisfy “needs” buyers, where circumstances in their life mean they NEED to buy or build. “Wants” buyers won’t be back in the market for some time.

Tim Zank on April 28, 2012 at 11:42 AM

False, but comforting.

Kenosha Kid on April 28, 2012 at 11:43 AM

and according to Business Insider

Business Insider. LOL. Joe Weisenthal is a hack. He’s been trying to sell the recovery for months now.

Mark1971 on April 28, 2012 at 11:44 AM

its called ‘summer’

tom daschle concerned on April 28, 2012 at 11:44 AM

New Home Market Coming Back?

….Regionally?….ahhhhhh…noooooo!
‘Pocket areas’ do not count!…I think, someone’s playing with something in their pocket!

KOOLAID2 on April 28, 2012 at 12:04 PM

Buy when everyone says sell. Sell when everyone says buy. Right now everyone is screaming sell real estate. You know what that means…

angryed on April 28, 2012 at 12:12 PM

Jazz, we are expecting a tsunami of foreclosed properties to hit the market shortly as the banks must dump their inventory and complete the foreclosures of loans long in default.

While I sincerely wish this market and the economy in general would improve, I must realistically say it will not happen. Every single real data point shows we are in serious trouble and no amount of wishful thinking from the dems is going to change that.

dogsoldier on April 28, 2012 at 11:26 AM

I completely see your point, and it’s not like I suddenly think we’re in the land of unicorns and roses. But this market has been so bad for so long, it would be nice to think that the light at the end of the tunnel could finally be in sight. (And not the headlamp of an oncoming train.)

Jazz Shaw on April 28, 2012 at 12:31 PM

The problem with these experts and their constant predictions of a bottom is that they look at today and compare it to what happened in the past. But you can’t do that this time around. This past recession is unlike any recession since the great depression. Also look at the growth of GDP in this recovery. In past recoveries the trend was a 3.4% growth rate..today it’s closer to 2.4%..again this is not like the past. Also look at the metrics of the market. We have a trillion in student debt which has to effect the first time home-buyer segment of the market. Then we have nearly a third of homes with mortgages underwater which has toe effect the trade-up or repeat market. Finally we have REAL wages flat to falling.On top of that we have Dodd-Frank hampering banks and Obamacare preventing any real job creation . So I look suspect at all these analysts who want to be the one to call the bottom.

galtg on April 28, 2012 at 12:36 PM

I completely see your point, and it’s not like I suddenly think we’re in the land of unicorns and roses. But this market has been so bad for so long, it would be nice to think that the light at the end of the tunnel could finally be in sight. (And not the headlamp of an oncoming train.)

Jazz Shaw on April 28, 2012 at 12:31 PM

Emphasis mine.

I agree, it would be terrific! Unfortunately, when I look at the state of our economy from the 40,000 foot or ground levels, that light sure looks like it has a train attached.

dogsoldier on April 28, 2012 at 12:43 PM

I have seen some areas where high end houses are being built but homes for the average middle class families not so much. Homes for the entry level buyer are simply not being built in any signfiicant number.

CW on April 28, 2012 at 12:44 PM

The rosiest projections for the future of the housing market always seem to come from people who are in the business: realtors, builders, lenders. It’s all wishcasting. I’ve had my condo in Florida rented for the last two years after trying to sell it before that. Recently my realtor called to tell me things are picking up in Central Florida if I want to try again. Sure, I could get maybe 30% of the appraised value today instead of the 25% I might have gotten two years ago. It’s still a fraction of what I have in it. Sure, the inventory is lower but that’s only because the banks are clearing foreclosures off the books. There are more where those came from and it will be a loooong time before that mess turns around and home prices go back up and traditional buyers are back in the market in significant numbers. I dearly wish there were a light at the end of the tunnel but I”m not seeing it. I expect l’ll be leasing it at least until 2020. Never thought that would be the case but I’m not giving it away.

NoLeftTurn on April 28, 2012 at 1:09 PM

There’s another slug of foreclosures already in the works and the current jobs outlook isn’t good. Another round of unemployment combined with the 5yr ARMs let in 2007 coming due (another load of homes under deep water due for refinancing) means another slug of them might enter the system later this year.

Many people who have just barely been making their mortgage payments while on unemployment plus maybe some side work here and there or just one member of a couple working are going to run out of benefits this year. California has already lost its final 20 weeks of “Fed-Ed” so everyone in the state getting that final 20 weeks of benefits will be cut off in mid-May.

July is going to be a very hard month for the Obama administration. By October he might have crowds on the White House lawn with pitchforks and torches.

crosspatch on April 28, 2012 at 1:30 PM

Trust me on this; The market is not getting better. In fact, this is the worst market I’ve seen since the condo crash in the late ’80′s.

KMC1 on April 28, 2012 at 10:37 AM

I guess it is regional.

You obviously don’t live in the SF Bay Area. What houses that are left on the market are getting multiple offers. GD bidding wars here. Over the last 90 days, the market here has gone from no buyers to no houses available. Dog properties that have been on the market for a year are INCREASING their prices!

My family has been priced out of the area. The prices for a 1100 sq/ft single family house that is 60+ years old is around $550,000 now!

JeffVader on April 28, 2012 at 1:42 PM

What is the inventory of existing homes?

Scroll down and check out the graph for existing home inventory’s and the decline in sales of distressed properties.

It’s true that construction usually leads us out of recessions, but the housing market is still extremely soft.

Dr Evil on April 28, 2012 at 2:11 PM

Anecdotally speaking, we are about to build a home, and have already been approved for the construction loan which will roll over into a 30 year mortgage. When we go to the bank with the builder’s bid, it will appraise at less than the cost to build the home. If we are fortunate, when the home is completed, it might appraise at the cost to build it. However, more than likely we will be underwater before we move in.

I know you think we are nuts, but the lot is on the lake where I grew up, and we plan on keeping this home for the rest of our lives. So, any headaches will be bequeathed to our daughter. Since she gave me a few headaches growing up, I’m okay with that.

kakypat on April 28, 2012 at 2:17 PM

JeffVader on April 28, 2012 at 1:42 PM

See the reference to “pocket market” above.

What’s hilarious about your example, is that 90% of those fueling the market in your area are “Liberals” who have no qualms spending $1/2million on a 2 bdrm bungalow, while decrying all those “greedy Republicans”. They don’t even see the irony or how stupid they are for spending that kind of cash per sq./ft.

KMC1 on April 28, 2012 at 2:31 PM

kakypat on April 28, 2012 at 2:17 PM

Ouch! Lol!

That’s the issue right there…real estate is meant to be a HOME and not an ATM….I think you’re doing it right! Not sure your daughter would agree tho! Lol

KMC1 on April 28, 2012 at 2:33 PM

I do not know if the banks have the luxury of this, but If I was a bank, I would not sell at rock bottom prices in the forclosure market, I would hold the properties until they come back to the value of the mortgage. That would be good for business, but I don’t know if it affects their cash flow, and they cannot do it.

Then IF I was a bank I would dump the trash for cheap, and hold the good properties until the market came back.

It is in everyone’s best interest that the floor has been met and that the curve on prices should go back upward. Where politicians don’t agree with that statement, they are against the idea of wealth and assets in real estate.

Fleuries on April 28, 2012 at 2:42 PM

The weather is warmer, home building is up just like retail sales are up during Christmas. This always happens.

When the economy is in a true turnaround, we’ll know it and feel it and not have to grasp at blips in charts.

Daemonocracy on April 28, 2012 at 2:48 PM

KMC1 on April 28, 2012 at 2:33 PM

Thank you! I’ve always felt that a house is a home, and not an asset to borrow against or flip when the time is right. As far as my daughter is concerned……..we’ll just keep that between you and I, mmmkay? She will find out soon enough after I’m dead. lol

kakypat on April 28, 2012 at 2:56 PM

Even with prices dropping and a backlog of inventory, new home construction had to start coming back sooner or later. There is always some demand, and when it gets put off, it builds pressure.

But construction, which has always been the domestic leader of recoveries, is nowhere near what it would be in a genuine recovery.

Adjoran on April 28, 2012 at 2:59 PM