At K&A, we represent clients that are exclusively selling their products in the building and home products channels; therefore, it is no secret that experiencing a depressed housing market makes everyone cautious. Sometimes it’s not easy to gage the depths of the ripple effect until it hits, usually expressing itself in slow sales and increasing inventories. There are certain barometers that can help us anticipate trends such as looking at housing starts and resales, but, at times it can be a matter of placing our trust in particular reports and using our gut feelings—which to some people, may be just short of consulting the Ouiji board.
This week, new data showed the housing slump continued in January and a major retailer doesn’t expect the sector to improve until later this year at the earliest. As a matter of fact, new-home sales fell 17 percent in January from the previous month, making this the biggest percent decline since 1994! Also, the median price of a new home rose from $239,400 to $239, 800, so even though there has been an inventory glut (which initially depressing prices) the increase means that the market might be slower to absorb inventory.
Sounds like an opportunity for our home building and products clients! Before you think we have lost our marbles, read on:
Daniel Oppenheim, a Bank of America Securities analyst, said “the 17% decline is in contrast with the improving trends seen in our January survey of real estate agents and comments from both public and private builders.†He gave several reasons why the Census Bureau data may be skewed in the wrong direction and added “the Census Bureau’s estimates of new home sales seem more a function of their statistical methodology than actual sales activity.â€
As a matter of fact, the National Association of Realtors reported sales of existing homes rose in January by 3 percent, the largest amount in two years! On top of that, median prices of existing homes fell for a sixth straight month!
The take-a-way: We all know that what goes down must come up. We agree with Robert Toll, the CEO of Toll Brothers who said “we continue to believe that buyer confidence is the key to a turn around in the new home market.†It appears that the media’s sentiment toward the housing market is becoming more balanced and their messages are making customers aware that in the current climate of attractive interest rates, motivated sellers, and a generally healthy economy, now is a good time to buy a home.
The consumer index, reported this week, is the highest it’s been in five and half years.
