House Starts Reports Promising, But Existing Home Sales are Another Story

There was mixed news this week on the housing front, which may do nothing to ease investor concerns about the depressed housing market.

The Commerce Department announced Tuesday that privately-owned housing starts in June were at a seasonally adjusted annual rate of 629,000, an increase of 14.6 percent above the previous month, and 16.7 percent higher than June 1020.

Permits for new construction, considered to be an indicator of future activity, increased two percent from May to a seasonally adjusted annual rate of 624,000. This is a 6.7 percent increase above June 2010.

While the pace of new private home construction was at its highest level since January, there were caveats expressed. The uptick in housing starts may be a market fix following the severe weather that has plagued much of the country over the previous months, according to a report by Capital Economics. The Commerce Department data “reflects a rebound in activity after the unusually severe tornados and floods depressed starts in both April and May, the report said as quoted in The New York Times.

Today, the National Association of Realtors announced that existing home sales decreased in June at an annualized rate of 0.8 percent from May and are now 8.8 percent below what they were a year ago.

Investors surveyed in June by Millionaire Corner/Spectrem Group are not optimistic about the housing market’s prospects within the next two years. Just over a quarter of investors think it will rebound, while just over 44 percent do not think it will. Just over 30 percent were neutral on the subject.

Across wealth levels, investors with a net worth of more than $5 million were significantly more likely to think that the housing market will not rebound within the next 24 months. Men and women were virtually of a mind that it would not (45.9 percent vs. 42.8) while nearly the same percentage (25.9 percent vs. 25 percent) were optimistic that it would.

While those under the age of 40 (28.5 percent) were most optimistic the housing market will rebound, nearly half of those ages 41 and up were not.

This pessimism has a firm foundation. Nearly 70 percent of the investors we surveyed know someone who had trouble in the past two years in selling their home.