30 March 2011

How US Housing Market fares lately? (30 March 2011)

Indeed, there is a insightful write-up by RHB Research today on the US housing market. People are still very curious about the US housing market, but yet to have the courage to BUY. Herd mentality? And, why US housing market is catching the attention of the world? Oh, thanks to Rich Dad Poor Dad, and the world famous property tycoon, Donald Trump.

In fact, I am wondering how did Donald fares these few years? That's why Donald had teamed up with Robert Kiyosaki to publish a book last year? People stop buying property because they're buying books nowadays?

A Double-Dip in the US Housing Market?... by RHB Research (30 March 2011)

US home prices, as measured by the S&P/Case-Shiller composite index of 20 metropolitan areas, declined by 0.2% mom in January vs -0.4% in December, and dipped for the 7th straight month to the lowest since April 2009. Year-on-year, home prices in 20 major cities fell by a larger magnitude of 3.1% in January, the 4th consecutive month of decline and from -2.4% in December. Home prices in these cities climbed up for 8 consecutive months from February until September 2010, before relapsing into a decline again since October last year, suggesting that the housing market is weakening, which will remain a drag to the economic recovery.

In many areas, home prices have fallen to 2003 levels, prior to the start of the housing bubble, due to the glut of supply in the housing market caused by rising foreclosures. This was compounded by potential house buyers' expectations of further drop in house prices, making them stay on the sidelines before entering the market to buy even cheaper houses. As a result, prices may fall further until foreclosures and short sales are cleared. Also, despite the millions of foreclosures and short sales, which is when lenders allow homeowners to sell for less than they owe on their mortgage, many of the homes for sale are undesirable, as the supply of homes that people actually want to purchase or could afford to is much narrower.

As a whole, falling prices and weak home sales would likely pose a drag to the economy, which is showing signs of strength elsewhere. Already, claims for unemployment benefits are at pre-recession lows, consumers are spending more money and manufacturing activity is growing at its fastest rate in 7 years. By contrast, sales of existing homes are coming off the worst year in more than a decade. And new homes are selling at the slowest pace on records dating back to 1963. In part, the weakening prices show how much a home-buying tax credit stimulated sales in late 2009 and early 2010. Once those tax credits expired in April 2010, many markets began a decline that shows no sign of stopping yet. Some economists say the tax credits merely postponed the bottoming out that's occurring now.

So, when would US Housing Market Recovers?
Finance Malaysia has a very general answer, abandoning all those complicated theories and analyst, that the US housing market will recovers once investors can't find any bargain at emerging markets. This year, Hong Kong is expecting a slowdown in property sales, with Li Ka Shing too looking to other vehicles for growth. China is going to increase interest rate again to curb excessive liquidity and inflation. Back home in Malaysia, BNM is hinting for more measures to control high household debt. Soon, investors would re-look and re-position themselves on US once emerging countries can't give them their desired return.

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