The problem with statistics is one can never take them on face value. Alone, in isolation, they never tell the whole story. For example, the statistics below seem quite “bad” until you factor in that in 2003, new home prices were at record highs, on their way to prices far beyond the pricing created from supply and demand, and new home sales were increasing at an abnormal pace.
U.S. new home sales fell in February to a record low and prices were the lowest since December 2003, suggesting the housing market slide was deepening.
Yet, when you compare this dire announcement to one that came out in February 2009, you can see something interesting – not much has changed in a year, and that, in my eyes, is a positive.
February 24, 2009 – The Standard & Poor’s / Case-Shiller home price index was down 26.7 per cent last December from its peak in the second quarter of 2006. Houses in the US are now worth the same as they were in the third quarter of 2003.
And the median price of a new home in February 2011 is? Answer – $202,100. And the median price of a new home in 2003 was? Answer – $243,756. The price differential is understandable given the reality of the forming bubble in 2003.
From the beginning of the recession in the second quarter of 2001 through the third quarter of 2002, house prices rose at an annualized rate of 7%, according to the Office of Federal Housing Enterprise Oversight (OFHEO).
Quite the rapid rise just prior to 2003, which makes the comparison of today’s prices to the prices in 2003 unrealistic. And what about the numbers of new houses sold in February compared to the numbers sold in 2003? It only makes sense that the number would decrease from those created in a housing bubble and those created in the recovery of the worst housing collapse in U.S. history.
Consider as well that the existing home price today is$156,100 ($168,100 in Feb. 2003). That goes right along with the statistic that shows existing-home sales in February are 26.4 percent above the cyclical low of July 2010. As well, new home sales account for less than 10 percent of overall sales, and, according to the National Association of Realtors, new home prices have been running 45 percent higher than existing home prices.
Throw all of this together, and one just might conclude that the overall housing market is not getting worse; it is pretty much remaining the same, which is a good sign. When considering all of this in conjunction with the fact the February is one of the three slowest months for sales, and one might also conclude that if the upward employment trend continues, the spring and summer just might see an uptick in the statistics. If so, take it at face value that U.S. housing market is coming back but at levels that are more reasonable and affordable, which could be the key …
Trade in the day – Invest in your life …
