Stock Market - New Home Sales Entering Premium Zone
S&P Case Shiller Index released on last Sep 25, 2012 clearly confirms that home prices have started rebounding. But the existing home sales figure is not much encouraging. The reason is the existing homes in the inventory is getting closer to all time low.
With recent hosing market crisis, people stopped buying homes and they started renting out in the last couple of years. It discouraged much on new homes constructions and the construction workers were on a long vacation either they switched the career or relocated.
But people migrating to USA did not slow down in the last couple of years. The US population is keep going up. Most people are hesitating to buy and started renting from 2006-2007. Consequently the rent moved up significantly and the new homes construction was very low until last year.
Currently some people think the housing crisis might have bottomed since the interest rate was at all time low for the last over 3 years, they started bidding for homes. But there is nothing much available in the market, especially where the school districts are very good. This created a huge demand for new homes. But the builder can not build homes very fast unlike software industry creating new copies are software. It does require significant amount of time to build a home.
Now the new home prices have started trading with premium and this premium will continue to go up until when Fed increases the interest rate. This also helps in appreciation existing home sale value and the home owners can do refinance now.
The worst time for buyer is going to come very soon that is when the home prices stabilize and at the same time inflation starts to go up and by rising the interest rate.
Wait for the election results and they might give more clear direction on the interest rates.