After several requests, and a few opinions, we took a look at the Housing sector to see how our bull market was unfolding. Our first report: http://caldaro.wordpress.com/2012/01/22/has-the-us-housing-market-really-bottomed/, and follow up: http://caldaro.wordpress.com/2012/03/20/quick-update-on-housing/, were over a year ago.
Our leading indicators, Building Permits and Home Builder Sentiment, are still rising off their expected 2009-2011 double bottom lows. In fact, building permits have nearly doubled from the lows of 2009 reaching their highest levels in five years.
Home builder sentiment has risen from a low of 8% in 2009 to well into the 40′s% in recent months. Recently reaching its highest level in nearly eight years. We are not expecting a downturn in housing prices, which is next, until six to twelve months after both of these indicators have turned down.
After a peak in New home prices in 2007 they declined about 25% into an early 2009 – late 2011 double bottom low. Since that low they have not only risen, but were just reported exceeding the highest price of the 2007 peak. New home prices have risen more than 28% in less than two years.
Fueling this rise has not only been historically low mortgage rates. Thanks to the FED’s Operation Twist and Mortgage Backed Securities buying programs. Plus, a somewhat muted economic recovery, and the increase in affordability, by not only lower rates and more jobs. But also by a substantial decline in relative household debt. Currently at its lowest level in more than 30 years.
Existing home prices, as measured by Case-Shiller, have risen 9.5% nationwide since their early 2012 low. Keep in mind this lagging indicator is inflation adjusted using the CPI, and has a two month lag in reporting data. Their latest reporting period was for February. So the actual price increases have probably been 2% to 3% higher. Nevertheless, we have been expecting a 15% to 25% increase in this index, from the lows, before the current bull market in housing ends. Which has at least another year, and probably more, to go. Happy house hunting.