Shiller Speculates on Housing: Crystal Ball Is Partly Cloudy

This was an unsettling day in just about every arena. There is a lot of confusion out there, according to the blog and news chatter, in interpreting the economic smoke signals.

Consumer confidence report turned south today. Unemployment marches on although the corporate diets are resulting in some good third quarter earnings' reports.

September new home sales were reported today and weighed in far below what was anticipated with a 3.6% decrease over August. The new home sales were particularly puzzling considering the positive influence of the $8,000 tax credit on housing sales.

Case-Shiller Home Price Index showed a 1.3 increase over July although prices are still down significantly from a year ago. Seven months in 2009 have indicated positive gains in house prices and September is the third straight month of increases.

The National Association of Realtors reported a huge 9.4% increase in pending sales for September over August but some argue the data is skewed to the positive by misleading seasonally adjusted methodology. Look beyond the fluff and dust act put out by the National Association of Realtors (read here) on the existing home sales in August. Things are getting better but perhaps not as good as the NAR spins.

According to NAR data less than 10% of September sales were over $500,000. The market in September was driven by REO sales and first-time buyers employing the $8,000 tax credit. Tough times lie ahead for the high-end housing market.

There is a rear fear of "shadow inventory" that may be lurking around the corner. The following chart from the TBP tells the story (click to enlarge image):



Loan applications are down over the last two weeks.

The stock market corrected today with the DOW closing well below 10,000.

Despite all the contradictory signals, there are is still plenty of cause for optimism. Watch the following Bloomberg interview with Robert Shiller, Yale University, of Case-Shiller fame. It is an excellent discussion on the confusing nature of where the housing market goes from here. h/t TBP. Click here or on image for video.


We are quickly entering the twilight zone of real estate - November & December holiday season. Amazing, isn't it?




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