Hoping the Housing Crisis Is Over
At long last, some good news from a pair of front-line economic reports.
Housing starts and new housing permits popped higher last month, the Census Bureau advises. After more than two years of nearly nonstop declines, robust increases in April in these two critical housing surveys lend fresh reason to think that the housing crisis, if not over, may at least be stabilizing.
Certainly the numbers look good for April, relative to the past. Housing starts jumped more than 8% last month, the strongest since last October. Meanwhile, new permits issued for building houses advanced nearly 5% last month--the highest since December 2006. In both cases, the actual numbers exceeded the consensus forecast by a healthy margin, according to Briefing.com.
April's rebound in these numbers is all the more encouraging since both data series are considered leading indicators. Economists consider housing starts and new housing permits a sign of what may be coming rather than what's passed.
Adding to the statistical cheer is yesterday's better-than-expected update on inflation for April, the Bureau of Labor Statistics reports.
But there's still plenty to worry about. The notion that the economy may be at or near a bottom is one thing. Expecting a strong rebound is something else. Indeed, yesterday's report showing a sharp loss for industrial production last month reminds that not all the news for April is encouraging.
Meanwhile, as inspiring as today's housing starts and permits numbers are, putting them in context with recent history is still a sobering task. As our first chart below shows, the fact that housing starts popped higher in April doesn't seem to alter the broader trend, at least not yet. It'll take many more months of higher housing starts to convince your editor that the winds have fundamentally changed.
The same cautious outlook also applies for permits. As our second chart below reminds, it's far too early to claim that long decline is housing permits is over.
Of course, if you've been beaten, slapped and cursed for a couple of years, the smallest bit of good news looks like divine intervention on your behalf. But it's worth pointing out that some of the smartest dismal scientists have been burned in calling an end to the real estate crisis. Recall that Alan Greenspan, the celebrated former Fed chief, said in November 2006 that "the worst is behind us" for the real estate crisis, as we reported at the time.
Yes, the housing crisis will one day pass. In fact, it may be in the process of bottoming as we write. But no one knows for sure, and the fact that the optimists have been burned a few times thinking otherwise suggests that it's still not time to bet the ranch on the idea that the housing crisis is over.
That caveat aside, there's reason for hope. We're certainly a lot closer to the end of this problem than we were when Greenspan made his ill-timed forecast back in November 2006. But no one should expect that housing will soon return to a roaring bull market. Having lost so much money in speculating on homes, with much of the cleanup still before us, the masses aren't likely to rush back in anytime soon, if ever. Licking the financial wounds will take time, even if macro signals suggest otherwise.
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This article has 15 comments:
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DaveW
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230 Comments
May 16 03:54 PMseekingalpha.com/artic...
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redriver
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20 Comments
May 16 05:20 PMZeus
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Alpha Seeker
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126 Comments
May 16 09:36 PM-
Heyoehkah
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2 Comments
May 16 10:05 PM-
bruin532
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74 Comments
May 16 10:34 PM-
drmalaka
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94 Comments
May 16 11:07 PMLook at the permits bounce between '06 and '07. That was the best news I had seen since Vince Vaughn split up with Jennifer Aniston. He was way too good for her.
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papita
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40 Comments
May 17 06:29 AM-
Jack Swanson
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9 Comments
May 17 08:28 AM-
ecklebob
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14 Comments
May 17 10:06 AM-
richjoy
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126 Comments
May 17 11:16 AM"...living in a dream"
"...smoking crack"
"prices much come down another 25%"
"moran...jackass&...
"...what rock did he crawl from...flippin burgers"
These negative responses are over-the-top!
All Mr. Picerno said was "IT'S NOT OVER", but we're closer to the end than the beginning--which means we are more than half way through the "housing crisis".
National housing permits peaked in late 2005, and prices soon after...If we are now, after 2 1/2 years, half way through the "crisis" period, it would be over +/- mid-2010.
Isn't it more than likely that even if we are not to return to "peak housing prices" for another 4 or 5 years, we will probably not be in "crisis" more than another year (mid 2009)?
And what's wrong with building appartments?...Are you suggesting there is no need for appartments because there is an appartment GLUT?...Where do people live when they have lost their home due to bankruptcy--do you suppose many rent?
You seem unable to accept good news when it is not the BEST news; second, your collective comments suggest you enjoy wallowing in "we're in recession/don't confuse me with facts..."all news is bad news, even if it's good news!"; and finally, if you are looking for a taxpayer bailout, you should have the guts to say so.
These reports are NATIONAL, but all real estate is LOCAL. Yes, there are serious home surpluses in many SMSAs on the coasts and Detroit/Los Vegas, but some markets are either doing reasonably well or only in a mild correction (from historic price inflation). The markets with the most serious surpluses are almost all those with the biggest recent building booms/price inflation.
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Tom Lindmark
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139 Comments
My Website
May 17 11:47 AM-
ed auerbach
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13 Comments
May 17 01:23 PM-
Scott Weitz
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21 Comments
May 17 03:20 PM-
gordon
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316 Comments
May 17 07:03 PMThey are pushing it up to break the 80-week $SPX moving average to cause a massive short squeeze, the market indices are all climbing to important technical levels, only the broker-dealers could conspire this. Foreign inflows, domestic inflows aren't happening. Much of this practically- free money (m3 running 18%) is being traded in energy/agricultural commodities, according to financialsense and other sites. Connect the dots. Paulson, in his final turn of the knife on American middle class, has given his elite rich buddies a commodities speculating playground, while the average taxpayer will be crushed by ever higher gas, food, for years. Stagflation. Bush's final farewell, like he said a year ago, " I think... I AM still relevant"
Play by the tape, not emotion. A break of $SPX 1440 means you need to be long, until wrong.
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peterthepainter
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97 Comments
My Website
May 18 10:07 AMeither gordon is right and it's a fix or the reason stocks will go up is because investors think that is what will happen. - bubble money looking for a place to go!