U.S. housing starts jumped some 14.6% to an annual rate of 629,000. Permits were up 2.5% to 624,000. And people are actually excited by this news.
As we’ve noted here many times, this means nothing. Housing is not recovering. Housing will continue to scrape the bottom of the barrel until millions of foreclosures work their way through.
Just thought you should know that, as the press pushes its bullish housing agenda.
As I said in Wealth Daily weeks ago:
As one of the guys who warned of the housing crash, I see no reasonable way to call a bottom.
I just read an article by Markos N. Kaminis. A sell-side analyst over a seven-year period at Standard & Poor, Kaminis is confident in his reasons for calling a housing bottom. Russell Price, senior economist at Ameriprise Financial, also believes the bottom is in.
But even Jim Cramer is smart enough not to call the housing bottom with the unemployment level where it is…
There Never Was a Bottom
After an 8.2% pop in pending home sales (which plummeted 11.3% in April), we’re likely to see another drop as mortgage applications fell again in recent weeks. Plus, the 8.2% jump means nothing when sales were down 20.4% year over year…
So forget that bullishness.
New home sales fell in May 2011 for the first time in three months, proving the industry is still struggling. Builders still have to deal with the fact that about two million distressed properties will eventually hit the market. That alone will take years to absorb. Economist Robert Shiller doesn’t see a bottom here, stating home values could plummet another 10% to 25%.
Housing prices need to fall further before we see a recovery, plain and simple.
Inventories are still high, and as many as seven million additional foreclosures haven’t been accounted for. Last week, Lennar bulldozed several partially built homes in California — in one of the areas hit hardest by the housing crash — to rebuild simplified and downsized homes.
“We’ve adjusted our offerings to fit the needs of the people today,” a spokesman for Lennar’s Central Valley division said in a statement.
That’s not what I’d call inspiring news.
And this might be my favorite part of the so-called recovery: About 10.9 million borrowers are underwater on their mortgages, according to CoreLogic. That’s 22.7% of all U.S. homeowners. On top of that, another 2.5 million borrowers in “near-negative equity positions.”
Sure, we’ll bottom eventually. But it won’t happen this year.
