Today, we finally got the numbers from Altos Research's May Housing Report, which is one of the most real-time indicators we have when it comes to the housing market. I use this as a way of predicting the over-hyped Case-Shiller report which Wall Street pays so much attention to.
The report states "The housing market in April showed a modest increase in home prices of 1.82%. The winner for the biggest price increase is the San Francisco Bay Area. San Francisco posted a 4.87% increase, and San Jose posted a 4.32% increase month-over-month."
Highlights of the report include:
The Altos national index median price was $440,194 in April, up 1.82% from $432,307 in March.
● Austin, Boston, Philadelphia, San Francisco, and Washington D.C. all showed double-digit inventory increases.
● Boston posted the biggest inventory increase at 19.18%.
● The leaders in the price increase category were in "Sunshine States" - San Francisco (4.87%), San Jose (4.32%), Phoenix (3.30%), Denver (3.23%), and DC (3.04%).
● The 7-day and 90-day averages are both trending upwards for median prices and inventory. The 7-day trends are always the first indication of a shifting market and should be watched closely.
● Prices were flat in New York, Philadelphia, Portland, Salt Lake City, Seattle, and Tampa.
● Las Vegas and New York were the only markets showing a decrease in inventory, and the decreases were modest (-1.05% and -0.26%, respectively)
The Bad News
While on the surface, this report seems to be positive for the housing market. Prices have ticked up during the spring selling season. However, to the more astute observer, this is only a temporary phenomenon. The housing market remains in a dire situation as high levels of supply, combined with a high unemployment make lower prices an inevitability, despite Federal Reserve money printing.
The real issue is supply which Altos notes is more than happy to accommodate the seasonal bounce in housing demand. From the report:
The housing market in April showed a substantial increase in inventory (11.45%). The top five markets for monthly inventory increases are Boston (19.18%), San Francisco (12.06%), Austin (11.46%), Washington DC (11.00%), and Philadelphia (10.29%). Notably, two of those markets rank in the top five for increases in median prices as well (San Francisco and Washington DC).Even though lower prices are expected, major investment figures like Marc Faber think real estate is still attractive from a valuation perspective (See Marc Faber's view HERE).
Sellers are entering the market at lightning speed to take advantage of the spring buying activity. The only markets showing a decrease in inventory were Phoenix (-7.40%), Miami (-5.55%), and Salt Lake City (a nominal -0.02%).
Bottom Line--The US housing market is still fragile and likely to see lower prices later this year as supply easily outweighs demand. No doubt this will not be welcome to members of the Federal Reserve. QE 3 anyone?
Black Swan Insights