I suppose if I were stuck on a desert island somewhere, I would want to be stuck with a bunch of housing analysts. If optimism helps you survive, these guys should guarantee it. How’s this for a strange conclusion:
“The worst has passed,” said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “We expect prices to bottom out around the middle of next year and then look for modest price appreciation for the next several years. There is still a tremendous oversupply of homes in most major markets.”
Modest price appreciation coexisting with tremendous oversupply? I don’t think so. Not even with this conclusion about sales:
Combined sales of new and existing homes have risen for four out of the last five months, signaling the worst of the housing crisis is over.
Sales of new homes climbed in August to the highest level in almost a year, the Commerce Department reported last week. Sales of existing homes unexpectedly declined, while remaining at the second-highest level in 23 months, the National Association of Realtors reported last week.
As we reported earlier this morning, the shadow inventory is growing. As Vitner stated above, there is a tremendous oversupply. As we maintained back in the boom days, you cannot consider either supply or demand in a vacuum. It doesn’t matter what the level of sales if it is not making a dent in the supply.
But wait, there’s more: Sales aren’t the only thing that have the analysts ecstatic. They are pleased at what they are calling "signs of stability":
Home values in 20 U.S. metropolitan areas declined less than forecast in the year ended in July, a sign the housing slump that led to the worst recession in seven decades is abating.
The S&P/Case-Shiller home-price index fell 13.3 percent in July from a year earlier, the smallest drop in 17 months, the group said today in New York. Adjusted for seasonal variations, the gauge rose 1.2 percent from the prior month, the biggest gain since October 2005.
There is nothing "stable" about a 13.3% annual price drop. Remember back in the good old days, oh say 2005 when we were told price declines were simply unthinkable? Can you imagine how the talking heads would have laughed at even the suggestion that in a few years we would be looking at double-digit price drops?
The analysts can put all the spin on it they like, but "not quite as horrible as last month" is still horrible, and not indicative of "stability". That’s not even on the horizon.