What do Thursday's housing numbers really mean? The existing home sales number made a big unexpected move in December, up over a seasonally adjusted 12%. This was a huge move at a time of year when inventories are always higher, but the question still hangs; can this move be sustained?
We need this move to be sustained in order for us to start to make a path out of the housing woods of uncertainty. The banks will start to increase foreclosures again this year and this is going to flood and already saturated market. This jump is without question great for the market and the animal spirits of confidence but it's going to need to continue through the spring and into the summer if we are going to be able to get some footing.
2 Major Speed Bumps In The Way?
Financing:Those prospective home buyers are still running into strict underwriting guidelines and a low availability of credit. Banks have just started to walk without the crutches of bailout money and they are not excited about jumping back into the fight. Their focus has building their deposit base and their cash reserves and not yet pushing the lending aspect of their business. They are also forced to contend with new regulation under the Dodd Frank Bill. Will the government get rid of the mortgage interest deduction? Will they require more down payment money for purchase loans? This uncertainty is in the way of progress write now.
Unemployment:Unemployment is the 800lb gorilla in the room. We continue to see a very elevated unemployment rate that weighs on the minds of everyone. Although we have started to see some green shoots with some companies starting to hire, we go back to that word of the day sustainability. I feel the economy is like that little train engine that keeps saying "I think I can" "I think I can". I wish a locomotive would just get behind it and push it up the hill.
These housing numbers are great news for all of us. Hopefully we will continue to see this progress and clarity in government regulation could be a huge catalyst to this market
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