Housing Bulls Looking for Strong S&P/Case-Shiller Reading to Close Out 2013
Traders in the Housing sector have been getting a flood of housing-specific data heading into the last few weeks of 2013. Since the beginning of last week (Monday was Dec. 16th), the Street has gotten readings on new and existing home sales, housing starts and building permits, and a look into the National Association of Home Builder's housing market index.
All of these data points are leading up to the final housing data point for this year: S&P/CaseShiller's Home Price Index. The data will be out on Tuesday at 9AM EST. Economists are currently expecting the October reading to be around 165.49, up about 0.9 percent month over month, and up about 13.4 percent from the same month in 2012.
The October reading for the home price indices will correlate with the five-year peak in building permits, and would not include the decline that occurred in the November data for building permits. This delayed picture of the housing market might be misleading.
In November, building permits went down 2.1 percent from the October level of 1.04 million annualized rate - the highest in a five-year span. Now the annualized rate is at 1.01 million, yet this still beat the consensus forecast of 990,000. Whether this means that the housing market is losing steam or that it is better off than previously thought is still up to debate, but with the release of the S&P/Case-Shiller HPI next week, economists will soon have a clearer answer.
Other indicators describe a different story. Sales of previously-used homes fell in October 0.6 percent, and in September they fell 4.6 percent. Much of this seems to be caused by higher borrowing costs. With an increase in prices caused by a smaller supply of homes, as well as high mortgage rates, many buyers are being cornered out of the market.
Limited inventory and harder to attain affordability conditions have hampered the housing market's role in the U.S. economic recovery, and a decrease in unemployment and an increase in consumer confidence could help the boost the expansion.
The slump in the sales of previously-used homes can be seen as a leading indicator and the decrease in building permits in November confirmed this. This does not mean should be expecting a contraction in the housing market in the long-term. Consumer confidence has taken a big hit over the year as political uncertainty has caused many Americans to be conservative with their purchases. An increase in consumer confidence would be beneficial to the housing market as home-buyers who were not willing to purchase a home, decide to enter the market.
In the short-run though, economists should still be expecting a decline. The fall in existing home sales and the slump in building permits all point to a slowdown in the housing market. Yet optimism remains in the long-run, since demand still seems to outpace supply.
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