The Bottom of the Housing Market at Last?
- Jul 25, 2012
Zillow reported that its Home Value Index rose on an annual basis for the first time since 2007, increasing 0.2 percent year-over-year to $149,300. The company’s second quarter report also noted that home values have risen for four consecutive months.
Does that mean that U.S. residential values have finally hit that long-elusive bottom? Zillow chief economist Stan Humphries thinks so: “After four months with rising home values and increasingly positive forecast data, it seems clear that the country has hit a bottom in home values,” he posited in a press statement.
But Humphries adds that there’s also some risk that rising foreclosures will translate into more homes on the market toward the end of the year, and not just more homes, but more lower-priced ones. “But we think demand will rise to absorb that, particularly in markets where there are acute inventory shortages now,” he adds. “Looking forward, we expect home values to remain relatively flat as the market works through a backlog of foreclosures and high rates of negative equity.”
Middle-Market companies a bit more pessimistic
The relatively new Middle Market Indicator, a survey published quarterly by the National Center for Middle Market Research at Ohio State University, reported on Tuesday that U.S. middle-market companies continue to lose confidence in the U.S. and global economies, but are expecting their own revenue growth to continue, although more slowly. The respondents also anticipate that employment growth will remain stable into next year, but not grow that much.
Conducted in June, the survey showed that middle market companies—in the opinion of 1,000 CEOs, CFOs or other executives of companies with revenues of $10 million to $1 billion—expect revenue growth will slow from 5.2 percent to 4.8 percent over the next 12 months. Companies projecting revenues to increase 10 percent or more in the next year dropped to 23 percent, compared with 28 percent reported in first quarter. Despite this slowing growth sentiment, middle market businesses continue to outpace S&P 500 revenue projections, which were a reported 3.4 percent this quarter.
“The middle market is the bellwether for the U.S. economy,” Anil Makhija, academic director of the National Center for the Middle Market, noted in a press statement. “This quarter’s indicator is showing that while the middle market continues to see revenue growth, hiring and job creation, it is becoming more conservative. Compared with last quarter’s results, we are seeing some softening and a greater emphasis on building a stronger cash position.”
Europe on the edge?
Meanwhile, the pot continues to simmer in Europe—or it boiling already? “We believe that as of July 2012, Europe is sleepwalking toward a disaster of incalculable proportions,” asserted a report released on Tuesday by the Institute for New Economic Thinking, a group of economists backed by George Soros. “The last domino, Spain, is days away from a liquidity crisis, according to its own finance minister.”
What to do? The economists have a number of suggestions, including greater short-term “burden sharing” for the economies that can afford it (that is, Germany). “Absent this collective constructive response, the euro will disintegrate,” the report warned. Investors seem to be thinking similar thoughts: 10-Year U.S. Treasuries once again touched record low yields on Tuesday as money looked for perceived safety.
Wall Street also continued to fret on Tuesday, with the Dow Jones Industrial Average losing 104.14 points, or 0.82 percent. The S&P 500 dropped 0.9 percent and the Nasdaq was off 0.94 percent—and that was before Apple announced (after the markets closed) that it has missed earnings expectations for the quarter, even though it’s doing quite well.