3 Reasons to Worry About the Housing Recovery
Over the last two years, we've seen an incredible rebound in the housing market. Virtually every statistic you can think of is markedly higher than the same time period last year. To cite only the most recent example, home prices have now increased by double digits on a year-over-year basis for six consecutive months, according to the S&P/Case-Shiller Home Price Index.
The significance of this can't be overstated. Legions of existing homeowners remain underwater on their mortgages. This drives down consumer confidence, which negatively impacts spending, which depresses the economy. As home sales and prices rise, in turn, this lifts people out of negative equity, and thereby mends both consumer confidence and spending.
But the bad news is that there are reasons to believe the housing market is taking a turn for the worse. Last week, the chief executive officer of PulteGroup said:
I expect it will come as no surprise when we say that conditions in the housing industry changed during the past few months as some consumers chose to step back from the market. Is this recent change among potential buyers the result of higher selling prices or higher mortgage rates or the relentless commentary of political turmoil and economic uncertainty? We would say yes.
This inflection point was on full display in the most recent round of bank earnings. Earlier this month, Wells Fargo , which is the nation's largest mortgage originator, reported a nearly 29% sequential decline in mortgage origination volumes over the three months ended Sept. 30. And JPMorgan Chase, the nation's second largest originator, followed suit with a 17% fall compared to the second quarter.
Should you be worried about this? On the one hand, the answer is no. Like the serenity prayer implores, it's important to distinguish between the things you cannot change and those you can. The housing recovery falls into the former category. On the other hand, as you can see in the slides below, it's nevertheless important to recognize that things may have changed, and that the housing market may, at the very least, be stalling.
The article 3 Reasons to Worry About the Housing Recovery originally appeared on Fool.com.John Maxfield has no position in any stocks mentioned. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of JPMorgan Chase and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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