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Good News but How Good?

February 22, 2012 – 6:31 pm

Existing home sales rose in January to its highest level in 20 months, an increase of 4.3%. At the same time last week applications for mortgages fell. Also, December’s existing home sales were revised sharply downward making January’s number look much stronger.

When gauging home sales it is never a good idea to look at one or two months worth of data. Trends in housing are more accurately defined after 3 to 6 months of data. It is clear that housing in the last three months is improving. In January sales rose in all four major regions with an 8.8% increase in the west.

We can say that the environment is improving in the housing market. However, a true sign of a healthier housing market is inventory and it fell to 6.1 months supply from 6.4 months. That is the lowest supply number since April 2006. A normal supply is about 4 months so we are a long way from normal.

With the robo signing issue settled we will see more foreclosures coming to market in the months ahead. Its impact is yet to be determined.

Good Trading
Steve Peasley

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