May 25, 2012

Consumers Upbeat On Housing. Are They Right or Wrong?

May 25, 2012

Consumers Upbeat On Housing. Are They Right or Wrong?

Mortgage bonds are regaining most of yesterday’s lost ground in today’s pre-holiday trading. We’ll end the week a bit above record lows.

We’ve got flat GDP and jobs market, a eurozone debt crisis, and fiscal paralysis in the U.S. yet consumer sentiment at 79.3 is highest since October 2007.

Day-to-day, consumers care most about where they live and how they get to work, so lower gas prices and better home sales data could be driving this. On this note, I wanted to quickly recap this week’s New and Existing Home Sales data.

April’s Existing Home Sales report showed the median price for an existing home was 177,400.

April’s New Home Sales report showed the median price for a new home was 235,700.

So median New home prices are 32.86% higher than Existing home prices. This spread has leveled off from a high of 49.23% in February.

These spreads exist because high-end new construction sells at a premium—those consumers can afford it. And short sales and foreclosure sales put a drag on existing home prices. And of course the higher inventory for existing home sales (4,620,000 annualized) vs. new home sales (343,000 annualized) contributes to the price disparity as well. Also, WSJ housing reporter Nick Timiraos made a good point this week on Twitter:

Increasing new home sales, builder confidence and new construction all help contribute to jobs growth which then helps economic and housing recoveries. But if you look more closely at builder confidence and construction you see that, while better, they’re a long way off from a definitive recovery.

Same for this week’s April home sales data, which is recapped below.

The next meaningful home price read comes Tuesday when Case Shiller releases its March home price report. I’ll dissect that when it’s released. Stay tuned on Twitter.

– Existing Home Sales (Seasonally Adjusted Annual Rate) 4,620,000
– Previous was 4,480,000 revised to 4,470,000
– +3.4% month/month, +10% year/year
– Median price $177,400, up 10.1% year/year
– Tenth straight month of year-over-year gains

NEW HOME SALES (April 2012
– New Home Sales (seasonally adjusted annualized rate) 343,000
– +3.3% month/month, +9.9% year/year
– Previous was 332,000, revised up from 328,000 originally reported
– Median price $235,700
– since 1963, annual average new single family home sales is 671,000 (WSJ)