The housing news is mixed, and the market is confused.
Pending home sales for May were down about 15% from a year ago. While that isn’t good, it’s not as bad as it was over the winter, when pending sales were down over 20%.
I’ve said before that housing figures between October and April are no good, but here’s evidence that some of the doomsayers may have a point. Even Janet Yellen, President of the San Francisco Fed, is downbeat on the prospects for a stabilizing housing market.
It seems that tighter credit and significant foreclosures are dampening demand for housing. If that is the case, we may be in for another round of losses in the financial sector.
At the same time, oil prices are back to where they were in May, following reports that Americans didn’t drive as much over the 4th. Seems that $4 gas is a tipping point, and people aren’t on the road as much.
We don’t know the future, but eventually higher prices for oil will reduce demand, and lower housing prices will increase demand. Both of these factors will ultimately help the consumer. The race isn’t always to the swift, but that’s usually the way to bet.
Douglas R. Tengdin, CFA
Chief Investment Officer
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