Housing: Still Groping for a Bottom
Tuesday brought another round of housing data and another opportunity for optimists to seek signs of a bottom, including a Commerce Department report showing a 7.2% year-over-year increase in June median home prices and a drop in the supply of new homes on the market.
But these positive signs were more than offset by the unexpected 1% drop in new home sales, as well as the 4.5% year-over-year decline in the May S&P/Case-Shiller Index.
For all the talk about the 1% month-over-month improvement in the Case-Shiller data, it was flat on a seasonally adjusted basis. Moreover, the 20-city index remains just a hair above its recent lows, and bouncing along the bottom seems to be the best-case scenario.
“Housing probably bottomed in the fourth quarter of last year or first of this year and while we certainly do not expect a strong move upwards anytime soon, significant declines from current levels would be hard to come by absent a shift in the macro landscape,” writes Dan Greenhaus, chief global strategist at BTIG.
Call me crazy, but I’d say a self-inflicted default by the U.S. government and/or a loss of America’s triple-A rating would count as “a shift in the macro landscape” — especially if interest rates surge or banks become even less willing to lend as a result.
Even with Washington looking more dysfunctional than normal, many observers believe that’s a highly unlikely scenario. Still, the idea of removing the mortgage interest deduction as part of a “grand bargain” to raise the debt ceiling is reportedly back on the table; that too would count as “a shift in the macro landscape” in my book.
Perhaps most importantly, the outlook for housing depends on the job market, which has taken another turn for the worse in recent months. (See: Return of Mass Layoffs a Grim Sign for U.S. Workers)
In a separate report Tuesday, the Conference Board said U.S. consumer confidence unexpectedly rose in July. This too is a hopeful sign because buying a house is the ultimate sign of confidence, especially now that it’s obvious you can lose money in real estate, contrary to popular wisdom during the boom years.
But it’s hard to be confident if your biggest asset is still falling in value and the job market remains tenuous, at best. Finally, I’ll note the Conference Board’s survey was taken before the debt-ceiling debate reached critical mass and it’s hard to be confident watching what’s going in Washington, regardless of your political affiliation.
Aaron Task is the host of The Daily Ticker. You can follow him on Twitter at @atask or email him at altask@yahoo.com
Categories: North America, Real Estate