Housing Market Increase

Per the Financial Planner:

Yesterday’s report on June New Housing Starts showed a sharp 15% month-over-month improvement. Although we believe the worst is over for the housing sector, the gain was stronger than underlying fundamentals would suggest.

New housing starts can be very lumpy, and severe weather across much of the U.S. in the months of April and May likely pushed some activity into June.

At 10 AM ET today, we see Existing Home Sales for the month of June. We expect sales to be fairly flat to modestly higher for the month with average selling prices still down about 4% to 6% on a year to year basis (see chart below as sourced from Thomson Baseline).

Year-ago comparisons however, become much easier starting in the month of July. The Federal Government’s homebuyer tax credit program provided a bit of artificial lift to market metrics last year before the program ended on June 30th. In the second half of the year, we estimate that prices and selling rates should be flat to slightly higher on a year to year basis in aggregate.

After more than five years of correction, we see the housing market as in a bottoming process. By a “bottoming process”, we mean that some months may be better or worse than others due to factors such as weather. We do not expect the sector to be much of a contributor to economic growth anytime soon, but importantly, we also don’t expect it to be much of a drag either.

In layman’s terms, “Things are looking up!”