Still Looking for That Bottom in Housing

A bevy of housing data has been released in the past 24 hours.  Economists and analysts are busy analyzing the data and attempting to search for that ever-elusive bottom in the housing market that is sure to save us all.  On the plus-side, new-home sales in July rose 2.4% to a 515,000 annual pace.  However, June was revised sharply lower from a previous estimate of 530,000 to 503,000.  Economists were expecting a decline from 530,000 to 525,000.  If you read between lines, you can conclude that the new home sales numbers are much worse than anticipated.  Furthermore, the median price fell 6.3% to $230,700 from the prior year.  The only glimmer of hope resides in the inventory numbers, which showed a decline in the number of unsold homes to a 416,000 pace, a 10.1 months' worth supply.  Builders have obviously cut back on new projects and are offering incentives to unload their bloated inventories.  While this is positive news, it doesn't tell the whole housing story.  Inventory numbers released yesterday with existing home sales weren't as cheery.  Sales of previously owned homes rose 3.1% to an annual rate of 5 million from 4.85 million in June.  The median dropped 7.1% from July and inventories rose to a record 11.2 months' supply.  Existing home sales account for 85% of home sales, which I believe gives the bigger overall picture of the state of the housing market.  The jump in inventory was driven by an increase in the supply of condos.  Because what we really need in this country is a few more condos, especially in Florida.

The Case-Shiller home price indices data for June was also out this morning showing a decline of 15.9% from the previous year.  The composite 10 index was off 17% year-over-year.  Economists were expecting these numbers to be worse, so that is positive news.  However, note that the trend is still lower.  If you factor in how much credit conditions have tightened since June, it is hard to believe that we've finally found the bottom as some optimists believe.  But hope springs eternal, particularly since the fate of the U.S. banking system hinges on a recovery in housing, which is far more palatable than more government bailouts.