Profit Confidential (www.ProfitConfidential.com), an e-letter published by Lombardi Publishing Corporation, a 28-year-old consumer publisher that has served over one million customers in 141 countries, is cautioning investors that U.S. housing is headed for trouble in 2014, as key indicators suggest a market top.
“Over the last two years, many have pointed to the U.S. housing market as a bright spot in an otherwise, uneven economic environment, but unfortunately, the so-called silver lining around housing is starting to wane,” says economist and lead contributor Michael Lombardi. “In fact, a number of key indicators are pointing to a top in the U.S. housing market recovery.”
While the National Association of Home Builders/Wells Fargo Housing Market Index rose one point from February’s reading of 46 to 47 in March, it’s still close to its lowest level since May 2013; the index is also down more than 16% year-to-date from the January reading of 56. The housing index is a gauge of confidence among U.S. home builders, with a reading below 50 showing that builders are pessimistic about sales trends. (Source: “Builder Confidence Treads Water in March,” National Association of Home Builders web site, March 17, 2014; www.nahb.org/news_details.aspx?sectionID=134&newsID=16724.)
Lombardi explains that existing home sales are also declining; in February, they fell 0.4% month-over-month and 7.1% year-over-year to their lowest level since July 2012. This comes on the heels of disappointing January existing home sales data. (Source: “February Existing-Home Sales Remain Subdued,” National Association of Realtors web site, March 20, 2014; www.realtor.org/news-releases/2014/03/february-existing-home-sales-remain-subdued.)
“The future doesn’t look bright for potential home buyers either, as interest rates are expected to rise. Between February of 2013 and February of 2014, the 30-year fixed mortgage rate, tracked by Freddie Mac, has increased by 22%, from 3.53% to 4.3%,” Lombardi adds. “What happens if mortgage rates go up to five or six percent as they were in 2007? Homes will become even more unaffordable.” (Source: “30-Year Fixed-Rate Mortgages Since 1971,” Freddie Mac web site; http://www.freddiemac.com/pmms/pmms30.htm, last accessed March 27, 2014.)
“With home builders’ confidence plunging, demand for homes declining, and home buyers facing rising mortgage rates, the real estate market is in for a weak 2014, possibly even a contraction,” Lombardi concludes.
Founded in 1986, Lombardi Publishing Corporation, which has served over one million customers in 141 countries, is one of the largest consumer information publishers in the world. For more information on Lombardi Publishing Corporation and Profit Confidential, visit www.LombardiPublishing.com.
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