Clichés form very quickly in markets, and the nascent housing
recovery has every sign of being the next one. Data over the last few
months has pointed to an improvement in economic indicators,
particularly in the housing market, and Tuesday’s Case-Shiller index
put the latest brick in the wall. While home prices seemed to have
bottomed out, investors should be wary of the next housing bubble, with
homebuilders seeing “uncomfortably high” valuations, according to Barclays, as markets ignore a still large shadow inventory and a shortage of high-quality homes.
The Case-Shiller indexes for July confirm that housing is rebounding. For a third consecutive month, all 20 cities and both composites were up in a monthly basis (the 10-city gained 1.5% and the 20-city was up 1.6%). On an annual basis, the 10- and 20-city composites gained 0.6% and 1.2% respectively, with only three cities (Cleveland, Detroit, and New York) seeing rates decelerating.
These gains are due to a “mix shift,” according to High Frequency Economics’ chief economist, Jim O’Sullivan. The rate of distressed sales (of foreclosed properties or short-sales) is declining, which in turn means the number of cheaper homes being sold off, as a proportion of the total number of sales, is falling, giving a boost to average prices.
Both composites remain about 30% off from their June/July 2006 peaks, as prices have returned to mid-2003 levels. While the number underwater mortgages has been declining, it is still fairly large, at 22.3% of all residential properties with mortgages, or 10.8 million units as of the end of the second quarter, according to CoreLogic. The latest data on the shadow inventory, which dates to April 2012, put it at 1.5 million units, or four months’ supply, which in turn puts pressure on major banks like Wells Fargo, Bank of America, and JPMorgan Chase, for example.
Read more: http://www.forbes.com/sites/afontevecchia/2012/09/25/housing-recovery-widens-case-shiller-shows-but-beware-the-bubble-in-homebuilders/
The Case-Shiller indexes for July confirm that housing is rebounding. For a third consecutive month, all 20 cities and both composites were up in a monthly basis (the 10-city gained 1.5% and the 20-city was up 1.6%). On an annual basis, the 10- and 20-city composites gained 0.6% and 1.2% respectively, with only three cities (Cleveland, Detroit, and New York) seeing rates decelerating.
These gains are due to a “mix shift,” according to High Frequency Economics’ chief economist, Jim O’Sullivan. The rate of distressed sales (of foreclosed properties or short-sales) is declining, which in turn means the number of cheaper homes being sold off, as a proportion of the total number of sales, is falling, giving a boost to average prices.
Both composites remain about 30% off from their June/July 2006 peaks, as prices have returned to mid-2003 levels. While the number underwater mortgages has been declining, it is still fairly large, at 22.3% of all residential properties with mortgages, or 10.8 million units as of the end of the second quarter, according to CoreLogic. The latest data on the shadow inventory, which dates to April 2012, put it at 1.5 million units, or four months’ supply, which in turn puts pressure on major banks like Wells Fargo, Bank of America, and JPMorgan Chase, for example.
Read more: http://www.forbes.com/sites/afontevecchia/2012/09/25/housing-recovery-widens-case-shiller-shows-but-beware-the-bubble-in-homebuilders/
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