Has housing bottomed?
Evidence builds that home prices could be headed higher from here.
The long nightmare seems to be finally ending. A combination of modest income and job growth, lower prices, low mortgage rates, and a steady decline in supply has finally put a bottom in on the housing market. Today's update from Standard & Poor's Case-Shiller Home Price Index showed a 0.9% month-over-month seasonally-adjusted national home price gain in May. That's the third consecutive strong monthly gain, the second best result since the housing bubble burst, and the single best monthly result since early 2009.
Although prices are still down on a year-over-year basis, that measure looks ready to jump into positive territory too. The good news looks set to continue. Here's why.
Merrill Lynch Bank of America economist Michelle Meyer believes today's report provides evidence that prices will follow a "bumpy and gradual path higher" from here after bottoming in the first quarter. Other measures of home prices, such as CoreLogic and the Federal Housing Finance Authority, have already turned positive on an annual basis.
A big reason for this is that there is simple less supply on the market for sale, especially for nice, move-in-ready non-distressed properties. Also, a huge upswing in rental demand over the last few years as moved the price-to-rent ratio back in favor of homeownership in many areas -- pushing buyers back into the fray. Also, regions that were hit the hardest during the downturn, such as Phoenix and Miami, and bouncing back on an influx of investors willing to pay cash for discounted properties. Foreign buyers have also been active.
All of this confirms the improvement in homebuilder sentiment we've seen, with the NAHB housing index jumping to its best level in five years this month. New home supply is extremely low even at the currently depressed sales rate. With just five months' supply available, an increased in construction activity will not only help put upward pressure on overall home prices (as percentage of sales shifts away from discounted, distressed fixers) but it will provide a boost to the economy as well.
As I mentioned in a recent column, that would result in the first positive contribution to GDP growth by the housing sector since 2005.
Overall, this is just another reason why I've been sounding an optimistic note over the last few months. I continue to recommend investors move into cyclical, economically-sensitive stocks and precious metals issues such as Amkor Technology (AMKR), which is up 5.1% since I added it to my Edge Letter Sample Portfolio on Friday.
Check out Anthony's investment advisory service The Edge. A two-week free trial has been extended to MSN Money readers. Click here to sign up. Contact Anthony at email@example.com and follow him on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.
Don't become yet another stat zombie. Put your data into context. I believe you are very foolish to make such bold predictions about a housing rebound in the complete absence of considering the larger economic environment.
Another indicator that housing prices have not bottom is looking at the rent-to-purchase price ratio. Rents, in general, are still way to low to justify home value increases.....at least in a normal economy. Any sign of a housing recovery will reveal itself as a mirage by early 2013.....if not sooner, but it is an election year.
Housing demand is artificially stimulated right now and there is plenty of proof! Top housing expert explains why "recovery" in major metropolitan areas is not at all as it seems.. Click on http://www.youtube.com/watch?v=49zeg-Pk_7U
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