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Momentum Continues to Build in Housing at Home and Abroad

Momentum continues to build in the housing market, domestically and internationally, and it appears that the real estate recovery is for real.  On the domestic front, we have taken notice of a positive trend in pricing, volume, inventory and sentiment across the country.  For these reasons, we contend that housing will remain as one of the brightest areas of the U.S. economy and will likely be an engine of future growth for the anemic state of the current U.S. economic recovery.

Three statistics that we, at Hennion & Walsh, generally review when we assess the housing market are existing single-family home sales and prices, inventory and months of excess supply as well as pending home sales.  A review of these three data points, as provided by the National Association of Realtors® as of November 2012, shows that existing home sales continue to improve in terms of sales volume, rather dramatically over the course of the prior 1 year period, in all regions of the United States, within all price points, with the exception of less expensive homes under $100,000 in the West region.

Regional Sales by Price
Existing Single Family Homes
November 2012

Source: National Association of Realtors, November 2012

The aforementioned 2012 gains in sales have occurred without the price discounts, or government program incentives, that we have seen in previous years, and are expected to continue throughout 2013.  To this end, according to the November 2012 REALTORS® Confidence Index Survey, all states are expected to experience home price increases over the course of the next twelve months with states such as California, Texas and Florida forecasted as having the highest price increases and states in the Northeast, such as New York, predicted to have the lowest prices increases.

Inventory levels have also fallen significantly over the past year as the months of excess supply have fallen by nearly 33%, from 7.3 months to 4.9 months.

Months of Supply (Seasonally Adjusted)
Existing Single Family Homes
November 2012

Source: National Association of Realtors, November 2012

Finally, pending home sales also improved in November 2012, rising 1.7% for the month and nearly 10% on a year-over-year basis.  Pending Home Sales is a forward looking indicator for the housing market as it is based on contract signings, as opposed to deal closings, so any reported increases often suggest better days ahead for housing.   Hence, the long term trends appear to be signaling that a mounting recovery with respect to the U.S. real estate market is taking place and gaining steam.

Despite all of the positive results, and associated optimism, with respect to the U.S. housing market, it could be argued that international real estate may actually be worthy of more attention.  As the chart below indicates, through September 30, 2012, although North America registered some impressive returns year-to-date (YTD), they were bested by several other international regions.

Source: FTSE, MSCI as of 09/30/2012.  “Global Real Estate Investment Commentary, 3^rd Quarter 2012, The Tuckerman Group.” Past performance is not a guarantee of future results.

We believe, at this time, that the trend of positive performance for global real estate will continue in 2013, with international markets likely outpacing domestic markets again.