August Existing Home Sales At Highest Level Since May 2010 But Shilling Says 20 Percent Drop In Home Prices Possible:
Housing market analysts got some conflicting information today. On a positive note, existing single family home sales rose to the highest level in over two years. Sales increased by 7.8% in August to a seasonally-adjusted annual rate of 4.82 million the National Association of Realtors said today. Sales of existing homes are being driven by cash buyers because it’s very difficult for people with bad credit to purchase a home. Nearly one-third of all existing home sales in August 2012 were cash deals and with unemployment stubbornly above 8 percent for 43 consecutive months, the average person doesn’t have the ability to buy a house. Regardless, the news was received well by market participants today and suggests the housing market is stabilizing.
Shilling Predicts A 20 Percent Decline In Housing Prices
The housing market may not have bottomed however according to Gary Shilling. Shilling predicts a 20 percent drop in home prices is possible in the near term. Shilling bases his prediction on the large inventory of excess supply in the housing market and current prices that are still way above the historical trend. Shilling has made several good calls in the past and his analysis has merit. Home prices are artificially too high even and rising in some cities so in essence, Shilling predicts a double-dip. A double-dip recession in general may be off the table but the possibility has increased due to staggering unemployment which hasn’t abated.
We are neutral on equities short-run until we see stocks hold support levels before the longer-term rally continues.