Look to 2011 for a U.S. housing recovery

Posted by Rumin Mann
July 26th, 2010

House prices in the U.S. have stabilized, but look for a setback on Thursday as pressure wanes from a last-minute rush of home buyers seeking to take advantage of the federal government’s tax credit.

For long-term investors, house prices are the key for a recovery in vast swaths of the U.S. economy, including the employment picture, building materials, household products and the financial health of the banks.

And in Canada a U.S. housing recovery will help the beleaguered forest products industry.


The U.S. house price index, which is scheduled for release Thursday, is forecast to have declined by 0.3 per cent in May, according to a survey of economists by Bloomberg. It rose 0.8 per cent in April and 0.1 per cent in March.

Existing home sales, which are also due out Thursday, are estimated to have fallen in June to 5.1 million units on an annualized basis, from 5.66 million in May. A larger drop off in existing home sales is expected in July and August when the full force of the expiry of the tax credit is reflected in the data, according to CIBC World Markets Inc.

“The post-tax-credit freefall in housing activity, aided and abetted by weak job and absent credit growth, appears destined to apply additional downward pressure on home prices,” said Michael Gregory, a senior economist with BMO Nesbitt Burns Inc. On a year-over-year basis, U.S. house prices are expected to be down 1.5 per cent.

Although the closing date for eligible sales with the tax credit was extended to Sept. 30 from June 30, sales began to plummet during May and June, Mr. Gregory said. The signing deadline for the purchases was April 30.

Click here to read entire article

Comments are closed.