Has the housing market bottomed?

It doesn’t seem like it. It’s a nasty vicious cycle, worsening economy getting more house owners in trouble and a worsening housing market hits consumer spending, further worsening the economy and preventing banks from lending out much again even as inter-bank markets have stabilized. And with mortgages difficult to get, house prices just keep on falling.

At some point, houses are getting cheap so that people can afford them again, and that point might very well be approaching, but if banks are not giving much mortgage credit, there will be too few buyers. Another stimulus package directly aimed at houseowners in distress could break this vicious cycle.

On the other hand, it is also working on the supply side, far fewer houses are being constructed. This will work its way eventually into a situation where supply and demand will be getting closer and the market will stabilize. But not just yet, or so it seems.

And since housing is at the epi-center of all the rot, this matters almost more than anything.

U.S. September Home Resales Jump 5.5% to 5.18 Million Pace
By Bob Willis

  • Oct. 24 (Bloomberg) — Home resales in the U.S. rose more than forecast in September, aided by foreclosure-driven declines in prices that made properties more affordable.
  • Purchases of existing homes jumped 5.5 percent last month to a 5.18 million annual pace, the highest level in a year, the National Association of Realtors said today in Washington. The median price dropped 9 percent.
  • The boost to sales from lower prices may be short lived as banks withhold financing on mounting concern that record foreclosures will hurt profits and depress values even more. The collapse in lending signals the housing recession will extend well into a fourth year.
  • Buyers are having trouble getting financing,” Terrin Griffiths, an economist at the California Credit Union League in Rancho Cucamonga, California, said before the report. “The economy is showing increasing signs of weakness and the housing market continues to struggle.”
  • Resales were forecast to rise to a 4.95 million annual rate from a 4.91 million pace in August, according to the median estimate of 66 economists in a Bloomberg News survey. Projections ranged from 4.7 million to 5.11 million.
  • Sales rose 1.4 percent compared with a year earlier, the first year-over-year increase since November 2005. Resales totaled 5.65 million in 2007.
  • Today’s figures compare with the 4.86 million level reached in June, the lowest in a decade and 33 percent down from the record reached in September 2005.
  • Inventory
  • The number of previously owned unsold homes on the market at the end of September represented 9.9 months’ worth at the current sales pace, the fewest since February and down from 10.6 months’ at the end of the prior month.
  • The median price of an existing home dropped from a year ago to $191,600, the lowest since April 2004. Falling home prices make it harder to refinance mortgages, pushing up foreclosures in the third quarter to the highest since record-keeping began in 2005, according to Realtytrac.com.
  • Resales account for about 90 percent of the market, while purchases of new homes make up the rest. Sales of existing homes are compiled from contract closings and may reflect contracts signed one or two months earlier.
  • Today’s report showed resales of single-family homes climbed 6.2 percent to an annual rate of 4.62 million. Sales of condos and co-ops were unchanged at a 560,000 rate.
  • Purchases increased in three of four regions, led by a 17 percent surge in the West as distressed sales jumped in California and Nevada. In the Northeast, sales fell 1.2 percent.
  • Distressed Sales
  • Foreclosure-related sales accounted for 35 percent to 40 percent of last month’s total, the agents’ group said. Of those, about 80 percent were for primary residence, higher than the average of about 75 percent and signaling that investors are not a primary reason for the jump, said Lawrence Yun, the group’s chief economist.
  • Declines in home equity have undermined consumer spending as owners have less cash to tap. A cascade of bank losses and failures has led to the most severe financial crisis in seven decades. Most economists are forecasting a recession in the U.S. and a global slowdown.
  • As home sales shrank, builders scaled back construction projects by 64 percent through September from a peak in January 2006, the biggest decline since at least 1959. Work began last month on the fewest single-family homes in 26 years, the Commerce Department reported last week. The number of building permits issued also fell, a sign that declines in construction will continue to hurt the economy.
  • No Bottom
  • The housing downswing is really not exactly even nearing a bottom at this point,” David Seiders, chief economist at the National Association of Homebuilders said Oct. 17 in an interview with Bloomberg Television. “The core problem in the economy is still housing, and house prices are decimating the financial markets.”
  • Construction companies continue to struggle. Pulte Homes Inc., the third-largest U.S. builder, this week reported a net loss of $280.4 billion for the third quarter, more than double what analysts had projected.
  • A bottom in the housing market may not come for some time,” Chief Executive Officer Richard Dugas said on a conference call yesterday.