December 11, 2010: Momentarily, Housing Barely Trends Up

The November Credit-Suisse monthly housing survey of fifty U.S. markets was released yesterday. Although the sector is still a mess, there were a few bright spots, as illustrated below. Still, interested parties in my world are not celebrating yet. They see banks continuing to withhold foreclosures from the auction block, maddening tight policies on foreclosures, short sales, financing stips and the availability of amortized credit. The unemployment rate,job insecurity, the sum of all local/state/ federal taxes and a sense that property values will continue to drift lower adds further angst to the mix. On the plus side,a temporary taxation regimen may be emerging from the carnage of the Beltway and may propel some further positive movement in the housing sector.This, along with buyers sensing that current interest rates and home prices may be a close-to-final opportunity to execute real estate deals.

Here is some selected data from the exhaustive and proven forward looking report: With a score of 50 being the norm, the overall foot traffic index moved upwards to 22.1 from 16.3 in October. pressure on home prices continues, with high inventory likely to add to challenges to sellers. The home price index crept upward to 21.6 from 20.5 in October. Credit Suisse expects this will continue for the next several months as many sellers choose to lower prices in order to complete a sale, and also into 2011 when foreclosures will likely return to the market, The home listing level (inventory) index stood at 41.3 vs. 35.5 in October.

In major markets, the survey indicated that Dallas (traffic index up to 28 from 14) and Houston traffic index of 26, up from 3 in October) along with better trends in Atlanta, Ft. Meyers, Jacksonville, Phoenix, the Inland Empire and Washington, D.C. Many other markets are problematic with a declines in all categories mentioned above at odds with the modest still-below norm results for the areas mentioned above.

The takeaway is there is no apparent lasting trend upwards that some have been predicting. The percentage improvement in all areas remains well below historic norms. No builders or sub sector material providers to the construction industry are recommended. On a valuation basis, investors may want to look at Home Depot (HD) as the home improvement business is picking up in property interior repairs, perhaps in part because of new home buyers and investors fixing up the trashed foreclosed homes purchased.