Home Numbers Can Be Misleading

Over the last couple months, we have seen some significant housing numbers point toward stabilization in the housing market. Some housing industries, such as building products and real estate management, have outperformed almost everything over the past 3 months. Sure, this does look like positive signs of a turnaround. However, I would err on the side of cation.

Home prices rose in a few places, mortgage applications came in higher, and investors thought this was the bottom. If you look closer at the numbers, the overwhelming majority of metropolitan areas around the country had decreasing home prices. Foreclosures jumped in July showing that people are still having trouble paying for their home. Unemployment is still high and is expected to rise even further. It is hard to see how prices will rise and foreclosures fall when unemployment is a major problem. I haven't even mentioned the rise in mortgage rates that might also discourage new home sales.

There is no doubt that housing saw positive signs this summer and investors were happy. This may very well be the bottom. But the fact is that people are still unemployed and having trouble paying bills. New home sales are still depressed. The only ones really buying are bargain hunters who are scooping up the foreclosures. I think housing remains nothing but speculation until unemployment decreases and people are able to pay their bills without a problem. What will be first to rise? Building products. It is what we need for renovation and new homes. This is why it has been the best performer for the housing industry the past quarter. Building products is where the cash money will be. Just wait for a pullback and positive economic news. Then start buying.