Housing Update

Ritholtz/Boockvar, 7/1:  May Pending Home Sales fell a sharp 30% m/o/m, twice expectations and of course without the influence of a home buying tax credit. The drop follows three straight months of gains and the decline was broad based. On a y/o/y basis, the decline was 15.6%. As with any temporary tax credit that is introduced to stimulate activity, demand gets pulled forward and is then followed by a sharp decline.

Naked Capitalism, 6/28: (Meredith Whtney) sees a 10% fall in housing prices in the next six months (!), which will hit bank earnings (Whitney has argued since at least early 2009 that banks have been goosing earning by under-reserving for losses) and the economy generally (a further decline in home equity plus lack of mobility of consumers wanting to sell their houses but facing a declining market has implications for consumer spending generally). She point out that consumer credit is tightening...

Ritholtz, 6/28:  Today, residential real estate confronts numerous headwinds: Credit..,is now tight. Today, demand is far below what it was during most of the past decade. Home prices are still unwinding from artificially high levels, and remain over-priced. Inventory is elevated. A huge supply of shadow inventory is out there...Bank owned real estate (REOs) continues to increase ...unemployment remains high, and is unlikely to improve anytime soon...and wages have been flat for a decade...Whether we are looking at US housing stock as a percentage of GDP or Median income versus home prices or even ownership versus renting costs, prices remain elevated. Indeed, we see prices remain above historic means.