Welcome to 2015! It looks like it’s going to be a good year . . .
Nevertheless, our attention was taken this week by a couple of relatively negative stories. First, the S&P/Case–Shiller home price index “warning,” suggesting that the housing recovery is faltering received a lot of attention. However, the commentary appeared to be based (largely) on month-over-month indicators of less than 1%, both upward and downward, citing flagging construction and limited new home sales as the primary culprits for a purportedly floundering industry. The second story was somewhat more disconcerting, pointing out that the U.S. home ownership rate continues to decline across all regions of the country, dropping to its lowest level since Q3 1994 -- now standing at 63.9%. In both cases, further investigation revealed a different perspective than “the sky is falling.”
Oddly, the Case-Shiller index metrics for December all came in higher than expected as a direct consequence of inventory tightening, as market-rate properties have been absorbed and foreclosure activity has waned. CoreLogic notes that while prices have begun to moderate, 2014 still registered a healthy 7.4% y/y increase. Yes, appreciation was down from 11.1% in 2013 – but that’s a good thing. Twenty-seven states and the District of Columbia are already at or within 10% of their peak pricing, and three states have pulled back the reins slightly, registering y/y depreciation of 0.7% in Maryland, 0.9% in Vermont and 2.2% in Connecticut. Prognostications call for a sustainable national appreciation rate in the 4.8% range for 2015.
Further to debunking the purported “softness” of the market, housing starts reached a six-year high at the end of 2014 with single-family construction up 7.2% to a seasonally adjusted annual pace of 728,000 units in December, the highest level since March 2008. And, new home sales rose a notable 11.6% month-over-month in December, and a significant 8.8% year-over-year.
With respect to the second issue . . . To read the full article, go to www.bowdensmarketbarometer.com and click on "subscribe"."
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