December House Sales Increase

by on
Macroeconomics, Supply & Demand

One swallow does not make a summer, so the saying goes, and one month of increased house sales does not sound the end of the housing slump. However it is a welcome sign reported in Reuters today and the net reduction in inventories will help slow (but not halt) the continued slide in prices. The bottom of the housing market will not be reached anytime soon but the increased activity is a sign that prices have dropped to a level below the cost of renting. With mortgage costs and house prices set to continue downward, the relative cost of buying a house will come down further as the year goes on. As with an overhang of inventory in the metals markets, the very presence of so many unsold homes has the effect of depressing prices even if demand begins to pick up so it is encouraging to see inventories stabilizing even if it is only one months figures so far.

House sales are an indication of consumer confidence which in turn is an indicator of likely consumer demand for a broader range of manufactured goods. New house construction starts are a more direct indication of metals demand due to the very significant quantities of copper, steel and aluminum materials used in modern homes. There is no sign new house construction is about to pick up anytime soon but the draw down in resale property inventories ” admittedly many of them distressed sales in the first place ” should be taken as an encouraging sign.

–Stuart Burns

Leave a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.