"No warning can save people determined to grow suddently rich" - Lord Overstone

  • 4 hours The Biggest Winners Of Q2 Earnings Season
  • 1 day Experts Suggest A Gold Shortage May Be Looming
  • 2 days The World Is Drowning In $247 Trillion Debt
  • 2 days Tightening Immigration Policy Could Hurt The Tech Sector
  • 2 days The First Bitcoin ETF Might Be Just Months Away
  • 2 days U.S. Rent Costs Hit All-Time High
  • 2 days European Allies Plan To Continue Trade With Iran
  • 3 days Bitcoin Bounces Off Key Resistance Level
  • 3 days These 3 Industries Are Immune To The Trade War
  • 3 days Is This The Answer To The Looming U.S. Healthcare Crisis?
  • 3 days UK Regulators Hit Facebook With £500,000 Fine
  • 3 days Tesla’s U.S. Tax Credit Coming To An End
  • 3 days Ex-Goldman Banker Caught In A Billion Dollar Fraud Scandal
  • 3 days Investors React To Escalating Trade War Drama
  • 4 days The Three Horsemen Of The Bitcoin Apocalypse
  • 4 days 10 Countries Feeling The Heat As The Trade War Escalates
  • 4 days The Exorbitant Cost Of Getting Ahead In Life
  • 4 days $1,000 Investment Bible Leaked For $10
  • 4 days The U.S.-Chinese Race To End All Privacy
  • 4 days Gold And Silver Struggle As Sentiment Shifts
Geoffrey Carpenter

Geoffrey Carpenter

Geoffrey is a freelance writer for Safehaven.com He focuses on Macro-economics, financial policy, low-risk investment and global obligations markets

Contact Author

Fundamentals Don’t Support Housing Market Fears

Homes

Commerce Department data showing a sharp drop in new single-family homes in January has sparked concerns that the entire housing market is in trouble, but economists say we’re putting fear before fundamentals.

According to released data by the Commerce Department, purchases of newly built single-family homes fell 7.8% in January—the second drop in two months. In December, purchases were down 7.6%.

The median sales price in January was $323,000, about 2.4% higher than in January 2017, but almost exactly the same as last year’s full-year average.

So, fewer sales, and no real upward movement in price.

January, however, is the worst month to paint a bigger picture of the U.S. housing market due to seasonal inactivity.

“It is hard to put a lot of stock in a January housing number due to the seasonal lack of activity, so we do not view today’s disappointing selling rate as an indication that the housing market is taking a turn for the worse,” said Thomas Simons, senior money market economist with Jefferies. “We will see better activity as the Spring approaches.”

The data also skews the picture geographically, because the January declines weren’t across the board, but were concentrated in the Northeast and South.

The larger fundamental picture is this: The U.S. housing market has been on a winning streak, helped by rising employment and higher wages.

And there are some other numbers that are persuasive indicators that January data isn’t reliable: Take Home Depot Q4 results, for instance. Related: The Hidden Threats Stock Market Investors Are Neglecting

Home Depot said sales at its stores open for more than a year rose 7.5 percent in the fourth quarter ended Jan. 28, beating out analysts’ average estimate of a 6.5 percent increase.

Higher wages and rising employment have prompted homeowners to buy new homes or remodel existing ones, benefiting Home Depot (NYSE:HD) and its smaller rival, Lowe’s Companies Inc (NYSE:LOW).

But there are still reasons to keep a close eye on upcoming data and revisions, as some analysts think we’re looking at an emerging downtrend.

For one thing, mortgage rates have moved up considerably since the beginning of this year, and this makes home purchases more expensive.

Tight housing inventory has also been pushing prices higher, helping to realize the sharpest year-over-year drop of sales of previously owned homes in more than three years. However, new home supplies are now at their highest since mid-2014 so price pressure may let up.

But new homes do not rule this market, which is dominated by previously-owned homes. At the of the day, we’re looking at a housing market that has regained half the value it lost—a whopping $9 trillion—a decade ago.

Now everyone’s on edge about another housing market crisis, but January data shouldn’t be enough to send investors running for the hills.

By Geoffrey Carpenter for Safehaven.com

More Top Reads From Safehaven.com:

Back to homepage

Leave a comment

Leave a comment