Money and Investing Thoughts

County home prices, sales numbers rise in April.

The median home price in San Diego county was $290,000 in April, up $5,000 from the previous month and $10k above the low set in January.

Sales number continue to increase in the county:

Sales totaled 3,375 in April, up 11.8 percent from March and up 20.1 percent from April 2008. It was the third month of month-to-month increases and 10th month of year-over-year increases.

An increase in the median price is a very good sign that the bottom of the housing market in California is near. I reported earlier that the per square ft. prices in Sacramento also increased in April.

Now we just need the banks holding foreclosed properties to firm up on their pricing, and the housing market will start a long, slow recovery.

Source: linked above.

I am a fan of continued low housing start numbers until the inventory of bank owned homes is mostly absorbed and job numbers start to improve. A problem is that low housing starts equals low job numbers in the construction sector.

I went and found housing starts data for the last 50 years and the current level is unprecedented. An eyeball look shows the U.S. economy absorbing an average of 1.5 million +- over the 50 year period. In only 33 months out of the last 590 has the rate of housing starts fallen below 1 million and then into the 800k to 900k range. Of the 33 months below 1 million, 11 have been in 2008 and 2009. Source here.

Current housing starts in the 500k annual range just will not keep up with population growth. The lag time of permitting, infrastructure, building and selling could push housing into a price bubble pretty fast once the economy starts to pick up.

Over the last 2 years homebuilders have built up cash and written down their real estate holdings. They can sit and wait for housing prices to rebound then start building homes that will be extremely profitable for those companies.

How fast this can happen is anyone’s guess. The recent collapse in housing has taken about 3 years. Housing starts peaked in January 2006 at an annualized 2.27 million. 2009 may end up being the greatest time in history to buy a home.

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The 1st quarter earnings release for Companhia Siderúrgica Nacional (CSN) (SID: 10.83 0.00 0.00%) is linked above. I like CSN for its exposure to the Brazilian manufacturing market and huge EBITDA margins. Revenues and profits for the first quarter were down about a third from a year earlier as the Brazilian economy slowed due to the global economic crisis.

At the same time the stock of CSN, as traded on the NYSE, is up over 50% so far in 2009. It seems the value of this quality company fell a little too far.

The press release from CSN has an nice overview of Brazil’s economy, the country’s steel using sectors and steel production and sales for the major global markets. If you are interested in Brazil or the steel industry this is good reading.

The news today may cause the shares of CSN to continue their pullback. For the long term investor, it may be a good time to pick up some shares.

The monthly real estate report from Mike Lyon’s Trendgraphix report has some interesting data. Mike says it better than I can so here are a few selected quotes:

In a reaction to REO inventories now below one month’s supply, more buyers are turning to short-sales in hopes of snagging the home of their dreams. (emphasis added)

…the price-per-foot is on the rise in Sacramento, Placer and Yolo counties…

Even the Non-REO inventories have dropped down to a 4 months’ supply which is very different from last year at this time when we had 9 months supply of inventory.

We still anticipate large numbers of REO properties to enter the market in late spring but if they are spread out and absorbed quickly there is the real possibility that prices under $200,000have seen the bottom.

Sacramento is experiencing very high unemployment and the state of California’s financial woes do not bode well for the local economy. The price per square foot gains are only a couple of percentage points and that number is about 1/2 of where it was 4 years ago.

It appears a bottom is forming in the Sacramento real estate market driven by a shortage on the inventory side. I would not want to see homebuilders rush in and pump up inventory, but at the same time some renewed construction would be positive for the employment side.

I have theorized that when home prices started to uptick it would unleash a buying gold rush. It now seems the gold will be in short supply and the banks holding foreclosed properties may be able to hold out for better prices than the current going rate. It will be interesting to see what happens.

March Lows a “Textbook Bottom” Buy the Dips Says Schwab Funds CIO: Tech Ticker, Yahoo! Finance.

March 9 was a “textbook bottom” and investors waiting for the retest may never get back in, says Jeff Mortimer, CIO of Charles Schwab Investment Management

Go to the article. Watch the video. Ignore doom-and-gloomers.