Here is a blast from the past. I came across this little nugget while doing some work on real estate. The title of the piece is Bubbling (or Just Frothy) House Prices? It was written by a couple of researchers at the Federal Reserve Bank of St. Louis in November of 2005. For context, I’ve included a chart of the Case-Shiller Home Price index with an arrow pointing to when the report was released. From the report (emphasis is ours): Yet, do the P/I [Price-to-Income] ratios observed on the two coasts constitute a bubble? Note that when real estate is evaluated as a potential investment, housing … [Read more...]
Homebuilder Confidence Sagging
For the third month in a row homebuilders indicated to the NAHB/Well Fargo Housing Market Index survey that they were losing confidence in the housing market. As you can see on the chart below, after peaking in December and January at 47—still a recessionary number—homebuilder confidence as measured by the index has fallen in February, March and April. [expand title="Click here to read more."] While homebuilders are seeing demand for their homes, banks are—perhaps rightly so—worried about lending into the housing market today. NAHB Chairman Rick Judson said “Many builders are … [Read more...]
Fields on Fire: Agricultural Land Boom
For the last three years a revolution in real estate has been growing in America’s heartland. Since 2010 prices of agricultural land have climbed significantly. What’s behind the boom and do prices have further to climb from here? Or are they about to take a turn into negative territory? … [Read more...]
Investors Driving Real Estate’s Wild Ride
You can see on the chart below that over time, sales of homes and the number of mortgage applications have tracked each other pretty close. Those fundamentals seem to have broken down at the end of 2006 when the number of mortgage applications was still rising but the number of homes actually being sold was plummeting. Throughout the recent crisis the relationship failed to repair itself. But something interesting is happening now. While the number of mortgage applications has been slowly rising from the middle of 2010, since the middle of 2011 home sales have been surging upward. That’s a … [Read more...]
Investing in Real Estate: Americans Done Cashing Out Their Home Equity
From the start of the Case-Shiller national price index in 1987 until the bottom of the financial crisis in 2009, Americans owned less and less of their homes. Homeowners were rapidly cashing out their home equity—they have owned less and less of their homes every year. It appears that trend may have ended with what looks like a bottom in 2009. The chart below shows the percentage of equity Americans own in their homes (in black) and the prices of their homes. Even as prices increased, Americans drew down the equity in their homes. The declining trend of the equity line from 1987 to 2009 is … [Read more...]
Housing Market: Looking for a Direction
Housing market data released this week revealed a mixed bag. Home prices measured by FHFA were up 0.8% compared to the month before and the number of permits to build new homes increased more than expected. Meanwhile the number of housing starts was lower than expected. The volatile MBA Composite Applications index fell slightly, pulled in either direction by higher numbers of refinancing applications and lower numbers of applications for new home purchases. Monday’s survey of homebuilders recorded a slight improvement in their sentiment. The housing market appears to be stuck in neutral. … [Read more...]
Housing Market Shows Slight Improvement
The Housing Market Index (HMI) survey of homebuilders conducted by NAHB indicated a slight improvement in homebuilder sentiment in June compared to May. The index continues to rebound from historic lows recorded through much of the last six years. NAHB Chief Economist David Crowe said “While the June HMI is in keeping with our forecast for gradually improving single-family home sales this year, recent economic reports that have shown some weakening in the pace of recovery likely factored into the marginal gain. In addition, builders across the country continue to report that overly tight … [Read more...]
VIDEO: Morningstar Economist Bob Johnson: Housing Highs, Lows, and New Normals
Lackluster Lending Growth Holds Back Housing
A bounty of housing data was released this week. Housing starts fell in February (though they were still near an unimpressive three year high), permits increased slightly, existing home sales fell, and home builders’ sentiment remained steady. In sum, despite some positive news, the housing market malaise continues. It can’t be called a comeback yet. At first blush, the cause of the housing malaise seems mystifying. The Pew Research Center says there are more young adults living with their parents than at any time since the 1950s. And our chart of the Case-Shiller Index shows that housing … [Read more...]
A Recovery in Housing
Has the long anticipated recovery in housing finally arrived? The latest round of economic data on the housing market points toward improvement. On Wednesday, the National Association of Home Builders (NAHB) released their monthly home builder confidence index. The NAHB/Wells Fargo Housing Market Index asks builders to rate current single-family home sales and sales expectations and prospective buyer traffic. The responses are used to generate an index where any number over 50 signals that more builders view conditions as good than bad. In January, the Housing Market Index increased to 25—the … [Read more...]
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