I am retired and take educated guesses on all things financial.

August 08, 2010

August 9, 2010: July Housing Data Continues Downward Trend

The July Credit Suisse First Boston Monthly Real Estate Survey was released this weekend and data points to the housing market in a continued decline. CSFB states that "prices remain under pressure, with weak demand and rising inventory" that indicates "further declines are likely." I prefer the CSFB Survey because of it's boots on the ground approach to detailed data collection across fifty major real estate markets nationwide. The predictive accuracy of the report over the long haul has been exemplary.

Illustrating buyer traffic since April, 2008 puts the present situation in perspective. With a score of "50" being average (1=worst 100=best), here is the situation in which we now find ourselves:

04/08: 33.1
05/08: 31.5
06/08: 29.0
07/08: 27.4
08/08: 25.9
09/08: 24.0
10/08: 19.6
11/08: 19.8
12/08: 25.3
01/09: 36.5
02/09: 36.0
03/09: 39.5
04/09: 48.4
05/09: 45.4
06/09: 43.1
07/09: 43.4
08/09: 44.5
09/09: 44.8
10/09: 43.5
11/09: 43.0
12/09: 41.1
01/10: 43.5
02/10: 41.4
03/10: 43.1
04/10: 48.7
05/10: 31.5
06/10: 19.1
07/10: 16.9

The report highlights the downturn after the artificial tax credit. A score of even average has not been reached in any month listed above. Survey consultants in summation declared that potential buyers "lack confidence, motivation and urgency as they confront lingering economic and employment concerns".

CSFB reports that home prices suffered nationwide, as all but two of the top twenty markets (Ft. Meyers and the New York City area)fell. The greatest declines occurred in Chicago, Phoenix, Florida ex-Ft. Meyers and Texas. Home builders have written down over $34b in land impairment charges over the past four years, and lower prices "likely continue to limit construction activity even further."

An interesting takeaway is that although some investors and primary home buyers have made successful deals in the residential market since the real estate bubble was pricked, it appears as though many others may have bought too early, and thus suffer from the effects of still another downturn in price. I suspect that government-inspired incentives are on the way to artificially prop up demand through no down payment loans (already coming into the picture) and other least through this election cycle.

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