The bounce in US housing is peaking. The median price of a new home has slid in three of the past four months. New home sales have dropped to a record low and mortgage applications for new purchases are at a 12-year low.
Given the government's efforts to prop up the market with tax credits for buyers and keep a lid on mortgage rates by buying mortgage-related securities, this is all "sobering", says John Authers in the FT.
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Meanwhile, with foreclosures at a record 15% of all home loans were either in foreclosure or late on a payment in December the supply surplus is set to rise even further. "The law of supply and demand" implies another 10%-15% dip in house prices, he says.
The big picture: sobering facts for stock bulls
This is a sobering reminder of how long stock investors can wait to make a real return. Only in the late 1950s did the Dow Jones Index regain its 1929 peak. The overall trend since the 1982-2000 bull market ended has been flat or down. Returns depend heavily on starting valuations.
Long-term bull runs begin when stocks are historically cheap. Unlike now, when the cyclically adjusted price/earnings ratio is above average and the market yields just 2%, half the long-term average. US investors "should remember that whenever they are tempted to get too bullish", says Buttonwood in The Economist.
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How inheritance tax trick is helping families save ‘six-figure sums’Happy to skip a generation to save thousands on inheritance tax? A deed of variation could be the estate planning tool you need.
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Nationwide: House prices unexpectedly dropped in AugustHouse prices fell by 0.1% in August in a surprise drop, according to Nationwide, as “affordability remains stretched”
