Some Positives on US Housing

US Housing starts dropped to their lowest level ever at an annualized rate of 466,000 which would indicate higher levels of unemployment in the construction trade. The doom and gloom of this number has been broadcast over and over in the media although I don’t believe anyone was surprised by the figure.

So what are the positives? National Bank of Canada put out an economic report focusing on the US housing market showing some positive signals indicating a turnaround may happen sooner rather than later.

Housing deflation has persisted for 30 months and average housing prices are down more than 25%. Without getting too technical, housing affordability has come back to long-term equilibrium levels allowing Americans to consider getting back into the market.

Mortgage rates are dropping and sales have been consistent for several months at 4 million units. There are currently 10 million renters in the US earning more than $50,000 per year which is above the income required to qualify for a conventional mortgage. If just 5% of these renters decide to buy, this will have a huge impact on inventory levels.

After peaking at 11 months worth of inventory for sale, inventories have dropped to 8.7 months. Six months worth of inventory is considered equilibrium. Mortgage applications were up 45% this week compared to last. While many of these applications were refinances taking place at lower rates which is also a positive, applications for purchase were up almost 10%.

The US housing market created this mess and it will be the market that leads us out of it.

What are your thoughts? Do you think we are around the corner to a stabilized housing market or are there many months and years of declines ahead of us?

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: