The financial press has done a good job reporting the bad news on the housing market over the past year or so, but they may have gone too far. I'm beginning to see news articles that have pockets of good news buried within them that tell me we may be nearing the bottom of the housing market correction. Looking at the various statistics together brings more optimism.
On May 23rd, CNN headlines read "Home sales dip; prices fall sharply," based on the news report from the National Association of Realtors that existing home sales dropped 17 percent from April 2007. An analyst quoted in the article said "this was the latest in a long string of disappointing results." Median home prices were down 8.5 percent since April 2007. By the tone of the article, everything was gloom and doom, leaving readers wondering when the massive bleeding would stop.
Yet the raw data from the NAR clearly show that existing home sales have stabilized around 4.9 million units (seasonally adjusted) since December of 2007, a fact buried by the author. Are home sales down compared to the unrealistic days of lax underwriting standards? Of course! But a five-month trend of stable home sales is a comforting statistic to me, especially compared to the drops of 4.5 percent in August and 7.1 percent in September.
Then on June 9th, CNN reported "Pending sales up 6.3 percent; prices seen falling." Again the author had a hard time containing his pessimism by claiming the report gave "mixed signals." This week the U.S. Census Bureau announced that construction of new homes fell 3.3 percent in May, but in the Northeast new home construction jumped 61 percent over April, the highest number since October.
Taken individually, these statistics do not yet indicate trends and they are lost amidst the gloomy tone of the news articles. Yet taken in aggregate, they may be signaling that we are at or near the bottom of the housing market. Absent a major crisis in the credit markets or oil rising above the expected $150 per barrel, I expect the media will turn more optimistic in September or October, as we get further away from last year's housing collapse. Then, in November, we will elect a new president who has the leadership to restore our hope and confidence.
All of this is good news for the financial markets, too. Less fear and greater optimism in the economy will help to settle the nervous stock and bond markets.