What do you expect?

The growing sense of optimism in a housing market "bottom" needs to be balanced with a realization that more challenges are ahead of us. There is a growing fear that the market will see a "glut" of new inventory as we appear to stabilize. Sellers who have been waiting for a "glimmer of hope" will rush to unload...after holding out during the past eighteen months. We have already seen a new wave of foreclosure inventory released into the market. We seem to be stuck at 10 to 12 months of inventory. It will be a necessary but not sufficient condition for "recovery" when we see inventory under six months supply. Inventory levels can drop through sales or through an increased demand.

Jobs will drive a housing recovery. Until we see the unemployment rate start to decline, we are likely going to see additional erosion in home value and housing demand.

Diana Olick at RealtyCheck and CNBC had an interesting perspective on seller expectations. The fact that the buying market seems to be "bottom feeding" on distressed inventory and driving pricing down for "organic" sales...all point to more discomfort for home sales.

Here is Diana Olick talking about falling prices on CNBC Friday...

Real Estate Investment Market Analysis

While some are calling a "bottom" to residential real estate, others are not so sure. Here is a sober analysis from Barry Sternlight, CEO Starwood Capital. He sees residential nearing a bottom while commercial real estate still has some trouble ahead.

Here was his interview on CNBC earlier today...

Cramer Calls "Housing Bottom"

While I believe the assertion that we have "the best affordability on record" is over-hyped, I agree that halting the constant value depreciation is the ultimate rainbow after the storm...Mr. Cramer has been predicting a mid 2009 housing bottom for a while. This video from TheStreet.com gives you Jim's "state of the market" view on housing.

Pending Recovery?

Today we received the April "Pending Home Sales" index results from the National Association of Realtors (NAR). The index saw its third straight monthly increase in the data and the greatest monthly increase in over seven years. This index is often less reliable than new home sales or existing home sales numbers but it can show a trend pretty well. The greatest increase in pending sales was found in the northeast and midwest.

Here is CNBC's take on the data this morning...

Construction Spending in April Surprises Economists

AP reporting on the April construction spending data. I guess we can't say that housing is flying high but as Buzz Lightyear might say...we are "falling with style".

US construction spending posts surprising gain

US construction spending posts surprising 0.8 pct gain in April; spending on home building up

• Jeannine Aversa, AP Economics Writer
• On Monday June 1, 2009, 10:28 am EDT

WASHINGTON (AP) -- Construction spending in the U.S. rose 0.8 percent in April, defying economists' forecasts for a decline.

The unexpected gain -- the most since August -- marked the second straight month that builders boosted spending on construction projects around the country, the Commerce Department reported Monday. Economists were bracing for a 1.2 percent drop in construction spending for April.

Before March's uptick, construction spending had fallen for five straight months.
In an encouraging note, private builders increased spending on housing projects by 0.7 percent, contributing to the overall improvement in April. It marked the first time since August that private home builders boosted such spending. At that time, they increased it 5.5 percent.

Private spending on all other construction projects other than residential ones went up a strong 1.8 percent in April, following a 2.6 percent gain in March. Builders increased spending in April on projects including hotels and motels, factories, power plants and health care facilities. That more than offset reductions in spending on office buildings, amusement and recreation projects and on other projects.

Spending by the government, however, dipped 0.6 percent in April. That refected spending cuts on schools, hospitals and other health-care buildings, and sewer and water-supply projects.

A collapse in the housing market, a credit crunch and a financial crisis helped push the U.S. into a recession.

Federal Reserve Chairman Ben Bernanke has said he hopes the recession, which started in December 2007 and is now the longest since World War II, will end later this year.
Builders have been hard hit. They slashed spending on residential projects in the first quarter at an annualized rate of 38.7 percent, the most since the spring of 1980. Spending on commercial projects was slashed, too.

Economists are hopeful that cutbacks by business in the current April-to-June quarter won't be as deep as they have been. If they are right, the economy shouldn't shrink nearly as much during this quarter as it had in the last six months, analysts say.