Wall Street Journal
March 25, 2009, 1:35 PM ET
Economists React: ‘Has Housing Hit Bottom?’
- Has housing hit bottom? It is much too soon to make this call. Recent housing numbers were influenced by weather. December and January were colder than normal in the Northeast and Midwest, and February was warmer than normal in the Northeast, and about normal in the Midwest. Temperature swings will swing the housing numbers, and the seasonal adjustment factors will augment these swings. On top of this, February was the eighth driest February in the 1895—2009 period, according to the National Climatic Data Center, the government agency within NOAA that monitors climate. Drier than normal weather during the winter months can also make the housing numbers spike. One key statistic pointing to “better-times-ahead,” however, bears watching. Last week, the Census Bureau reported that single-family housing permits (which are not influenced by weather as much as other housing numbers) increased 11.2% in February, but today, it revised this increase to 16.1%. Until we get another two positive readings on single-family housing permits, at best we can say that housing has likely hit an inflection point. An inflection means that the market is shrinking, but not in collapse. –Patrick Newport, IHS Global Insight
Sales remain incredibly weak, but, as with the existing sales numbers, we are prepared to hazard the view that the post-Lehman meltdown is now over and the market is stabilizing. That’s not the same as a recovery, but it is better than continued declines in sales. –Ian Shepherdson, High Frequency Economics- Overall, this report is better than we had anticipated, continuing a pattern of the February housing data exceeding expectations (recall that existing home sales bounced by 5% and housing starts climbed by 22%). To be sure, the improved data last month followed months of horrendous housing data, as activity fell off of a cliff following last fall’s financial upheaval. The pickup in February also came on the heels of an especially weak January performance, suggesting that the January-February swing may have reflected in part a weather effect. Still, the fact that starts, permits, and home sales rebounded in February despite still-challenging economic conditions suggests that, at the very least, the pace of decline in housing demand may be abating. It is clearly far too early to call a bottom in the housing market, especially given the deterioration in the labor market, but the February data have allayed some fears that the housing market would continue to freefall. –Omair Sharif, RBS Greenwich Capital
- Even with the number of homes available for sale down another 2.9%, a twenty-second consecutive decline to a seven-year low, the months” supply of unsold new homes only moderated to 12.2 months from the record high 12.9 months hit in January. Around 5 to 6 months of supply would be consistent with a balanced market, so inventories are still completely out of hand heading into the crucial spring selling season. There’s little chance that the marginal bounce off the prior record low in single-family housing starts in February (the larger gain in overall starts was almost entirely in the volatile multi-family component) can be extended with inventories so bloated. –Ted Wieseman, Morgan Stanley
- New home sales in February staged their largest increase in over a year, increasing 4.7% to an annual rate of 337,000. Price concessions may be an important factor bringing buyers to the market last month; both median single-family home prices and average single-family home sales prices were down by record amounts in February. Almost half of homes sold last month were under $200,000; in the same month last year only 33% of homes sold were in this price range. –Michael Feroli, J.P. Morgan Chase
- The rebound in the number of U.S. new home sales may just be monthly volatility rather than a sign that housing activity has stabilized. New home sales fell by a huge 13.2% in January meaning that the 4.7% rise in February is nothing to get too excited about. Sales are still a frightening 75% below their peak. Admittedly, the figures do suggest that the rebound in February’s existing home sales (figures were released on Monday) was not solely due to a surge in sales of repossessed properties –Paul Dales, Capital Economics
- Federal Reserve Chairman Ben Bernanke talked about early signs of some “green shoots” appearing in the economy in his recent 60 Minutes interview. This week we are seeing some further positive notes in form of better-than-expected new and existing homes sales and durable goods orders for the month of February. These, and other positive, or even “less bad”, signs are a welcome change of tune following the severe economic downdrafts extending from autumn 2008 into early 2009. However, just as green shoots can get buried by springtime snows, the small upside surprises that we have seen may yet be overwhelmed by ongoing downward momentum in business investment, labor markets, durable goods consumption, and export markets. The U.S. economy remains many months away from stability and is even farther away from sustained growth. –Robert A. Dye, PNC
- Only a small rise in sales after 6 consecutive monthly declines cumulating to -36%. Sales of previously-owned homes appear to be bottoming (again! After Sep-Nov downdraft), and the Mortgage Bankers Association index of mortgage applications for home purchase has stabilized in recent weeks. Nonetheless, one month’s increase in sales in newly-built homes is not enough to call a trough in this series. –Alan Levenson, T. Rowe Price
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