There are moving parts that begin to describe the totality of the U.S. housing market. Of these parts - Sales, Inventory, Starts, Starts, Prices - move at much different speeds:
- Sales figures hit an all-time high in June-July 2005, turned and are still pointed downward.
- Inventory figures in 3Q06 have been the highest ever in terms of absolute numbers and months supply and are still pointed upward.
- Starts made highs in February 2005 and January 2006, turned downward and are still pointed downward.
- Building permits made an all-time high in September 2005, turned and are still pointed downwards.
Taking these metrics and comparing them to prices, the market gets:
- Home builder shares hitting a low in July through September 2006 and starting to point upward again.
- Case-Shiller Indices having only started to flatten out, with the exception of BOS and WDC (lower) and CHI and LA (all-time highs).
Of these metrics, fundamentals and prices have been close to moving in an expected inverse relationship. Further, home builders share prices have already been through a recession and crash and rebound, all in this year alone. The housing price movement is the slowest by far. However, housing prices appear to move powerfully, almost with low gear torque, maintaining trend movement. Those CME cities that have flat-lined in price this year - DEN, LV, MIA, NY, SD, SF and CUS - have yet to make a direction statement... although their forward prices are lower in 2007.
All opinions expressed herein are those of the author, and no statement should be as an offer to buy or sell any futures contract, or security or option or other derivative instrument. Trading of all such futures, securities, options and other derivative instruments entails significant risk which can result in substantial financial loss. Such risks should be fully understood prior to trading.