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Housing May Be Bottoming Out

Filed by KOSU News in Business.
July 26, 2011

The housing market still isn’t getting better. But two key reports out today suggest it has stopped getting worse, at least for now.

1. Home prices rose a bit between April and May, according to the latest Case-Shiller numbers. Note the little uptick on the right side of the graph:

Major caveat: The rise was largely due to the fact that home prices generally tend to rise in the spring. After accounting for the season, home prices were basically flat between April and May, according to S&P, which publishes Case-Shiller.

The “data all support a continuation of the ‘bounce-along-the-bottom’ scenario we have witnessed in the housing market over the past two years,” according to today’s report.

2. The glut of newly built homes is diminishing, a separate report out today from the Census Bureau shows.

It would now take 6.3 months to sell all the newly built homes on the market. In a normal market, it would take less than six months, CalculatedRisk notes. So this is still elevated a bit, but it’s way down from where it was a few years ago, when it spiked up to 12 months.

Months of supply is key, because it shows the relationship between supply and demand. For years now (the housing bust started five years ago!), a glut of newly built houses on the market has been one of the factors pushing prices down.

Homebuilders responded by building far fewer homes (housing starts have been at record lows), and today’s number shows that supply and demand are coming back into line for newly built homes.

Of course, none of this means home prices are about to start rising again. Two big problems still facing the housing market: the nation’s high unemployment rate and the ongoing wave of foreclosures. [Copyright 2011 National Public Radio]

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