3 Charts That Show the U.S. Housing Recovery

The U.S. housing market is back, baby!

After an epic meltdown following years of rampant speculation, the U.S. housing market has made serious recovery strides. Data from the National Association of Realtors on existing home sales in May continued to show the steady gains for the housing in the U.S.

Source: National Association of Realtors. May change reflects year-over-year change.

The overall pace of existing home sales has picked up and reached a seasonally adjusted annual rate of 5.18 million in May. As interest rates pick up, the refinance boom that's been going on for a few years is rapidly slowing. That will hit the fees that major mortgage originators like Wells Fargo  (NYSE: WFC  ) and JPMorgan Chase  (NYSE: JPM  ) collect when they originate a loan and resell it. However, if purchase volume continues to pick up, fees from those transactions could be a partial offset to the drop in refis.

Source: National Association of Realtors. May change reflects year-over-year change.

Compared to the home-price peak of more than $225,000 in 2006, the median existing-home sales price in may of $208,000 is still relatively affordable for home buyers. At the same time though, rising home prices are salve to the psyche (and overall wealth) of home-owning consumers. It's also a boon for banks as rising home prices makes homeowners less likely to default. Among the big banks, Bank of America  (NYSE: BAC  ) still has 2.6% of its loans in nonperforming status, while Wells Fargo shows 2.4%. Continued gains in home prices could help push those ratios lower.

Source: National Association of Realtors. May change reflects year-over-year change.

As sales pick up, the abundance of housing inventory that was sloshing around in the market is getting sopped up. Lower inventory helps underpin further gains in home prices -- remember Econ 101: lower supply can help push prices up. Tightening inventory is also music to the ears of homebuilders. Just this week, we saw solid quarterly numbers from both Lennar  (NYSE: LEN  ) and KB Home  (NYSE: KBH  ) . New orders at Lennar were up 27% year over year, while its backlog dollar value leaped 76%. At KB, homes delivered were up 39% even as the average selling price climbed 25%. In other words, both companies seem to be reaping the gains that we see in all three of the above charts.

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Read/Post Comments (16) | Recommend This Article (32)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 28, 2013, at 5:26 PM, smpots wrote:

    But describe this recovery without spin. If it is all debt; well,mother than Pelosi, Obama and associated unethical cronies, I can't recollect anyone getting out if big debt with more debt.

  • Report this Comment On June 28, 2013, at 5:36 PM, altrue1090 wrote:

    You can borrow (and invest in yourself) to get out of debt.

    A student loan to finance college or higher education

    can pay off.

    If a country borrows and invests in infrastructure and the education of its citizens (GI Bill after WWII) it can grow itself out of debt.

  • Report this Comment On June 28, 2013, at 5:48 PM, Gorm wrote:

    Housing is a MAJOR sector and growth is reflective of a recovery but....

    In several markets cash buyers reflect a new kind of bubble blower.

    Housing valuation has always been a reflection of average wage, which have been falling, adjusted for inflation EVERY year since 1995.

    RealtyTrac reports 26% of mortgaged residences are STILL underwater.

    The US is no island. Look at Europe, Japan and China - all major economies.

    There are ALWAYS people with $$$.

    Our country is STILL hurting. Rising rates will adversely affect the recovery of this sector.

    Gorm

  • Report this Comment On June 28, 2013, at 6:39 PM, ghwill wrote:

    Unfortunetely, median incomes are not rising. In fact they have been declining as people go back to work at new jobs that are of lower quality.

    Unless we see incomes start to rise, then I am not sure if there will be support for rising home prices or the ability for many people to shoulder higher debt levels.

    GW

  • Report this Comment On June 28, 2013, at 7:00 PM, Goodnewshar01 wrote:

    I agree, 100%, with this caveat. Our education system is MORE than broken. Students obtaining loans to be taught what high-school should have offered, or 'dumbed' down into the 'union mentality' of lowered expectations....fight for your rights, your heritage, be an organizer, etc... rather than skills to create, produce and be accountable, will NOT raise our ability to BUILD those infrastructures.

    I have seen 'upclose' and personal students being encouraged to take out loans to learn to 'speak english'? retake classes where they received a 'c' so they could apply for a SCHOLARSHIP, and more. We have to fix the decay of our education, from the ground up, then we can get on the road.

    The bubble is made by undereducated people who think their talk, loans, etc will sustain a society.

    Let's get real....and fund our country's remedial and charter and accountable schools, from early ages, to TEACH...and not put the money into telling them to get college loans to be dumbed down or 'organized' or appeased. Send them all to the East coast, where schools educate and train students to be hired by corporations, and contribute. That's the path.....

    Love your clear insights, GW....let's get ON with this!

  • Report this Comment On June 28, 2013, at 7:02 PM, PaintItBlue wrote:

    I would have liked to see a bar that showed how things were before the crash.

    Also - how much of this rise in the price of existing homes is because investors have snapped up some of the foreclosed properties that were going really cheap?

    I don't know how much the housing market is going to recover here, unless some things change. Still have a lot of people out of work, new jobs aren't paying so well, and folks in the public sector have taken pay cuts.

  • Report this Comment On June 28, 2013, at 7:31 PM, shotel wrote:

    Well, the jester is at it again. Half of the story...if that.

    Considering that mortgage lending requirements are as strict as ever, that a (so-called) "average" $208K mortgage requires a low debt to income and a $70,000/year household income - and the FACT that the median American household income is $51,404...just who is buying these homes?

    Here in Las Vegas, 4 out of 10 homes sold in the past 18 Months were sold to CASH "investors". Are these investors individuals who saved their pennies and are looking for a little ROI? Nope. These are institutional investment groups...BIG one's like Blackstone (to the tune of $4.5 Billion), Colony Capital, and other massive Syndicates who bundle the purchases into exotic investment instruments then sell them to other large private equity partners.

    hummm.... haven't I heard this scenario before somewhere?

    But guess what? These private equity firms have zero intention of selling [flipping]. They will make a 18% IRR by simply renting to us 'po folk. When these landlords ... can you say landed aristocracy? .. own 5 or 10 million homes, they also control the market value of every home in the U.S.. Forever.

    Thanks again Fool for being the running dog lackey for your 1% masters.

  • Report this Comment On June 28, 2013, at 7:38 PM, xetn wrote:

    The housing rebound (if there really is one) is all Fed induced.

    There are still millions of houses that are either REOs of will soon be foreclosed.

  • Report this Comment On June 28, 2013, at 10:59 PM, charmboy wrote:

    Here in Las Vegas, 4 out of 10 homes sold in the past 18 Months were sold to CASH "investors". Are these investors individuals who saved their pennies and are looking for a little ROI? Nope. These are institutional investment groups...BIG one's like Blackstone (to the tune of $4.5 Billion), Colony Capital,

    My friend from Philly did save his pennies to buy a home in LV last year. According to Mr. shotel, he must be a ghost.

  • Report this Comment On June 29, 2013, at 6:42 PM, rockythesquirell wrote:

    Maybe Americans are not buying homes, but I know a ton of us Canadians are buying up properties down south. With our high dollar and low interest rates and your lower prices it's a opportunity of a lifetime.

  • Report this Comment On June 30, 2013, at 11:56 AM, shotel wrote:

    @ charmboy - My friend from Philly did save his pennies to buy a home in LV last year. According to Mr. shotel, he must be a ghost.

    Re-read my quote. 4 of 10 homes are purchased using cash. If your friend paid cash, s/he is my hero for having enough sense to not leverage an investment property as an individual. Assuming it was both an investment purchase and a cash deal...which would be extremely rare for an individual investor.

    @ rockythesquirell - True. Many Canadian buyers here. Chinese equity syndicates have purchased blocks of homes here as well, as many as 500 units from banks in a single deal.

    At issue is if the home values rise is attributed to Billionaires bidding against other Billionaires that increases the value, why would that be any benefit to the average American? I suggest searching a NY Times article that details just what entities are moving the market.

  • Report this Comment On June 30, 2013, at 1:49 PM, 45ACPbullseye wrote:

    Nice snapshot Matt! I am interested in this topic as well. With the recent spike in mortgage rates, it will be interesting to compare these to charts with the same metrics in 90 and 180 days. I recently wrote a blogger piece on the new "Single-family REIT" sector, and the housing rebound for the Motley Fool community. @shotel, @charmboy, @rockythesquirrel, I would be interested in your thoughts. Best, Bill

  • Report this Comment On June 30, 2013, at 10:06 PM, FiatDebtHolder wrote:

    No mention of the 11% jump in foreclosures? No mention of the squeeze in available funds for average household as taxes (including Obamacare - a tax remember) rise? Food, energy go up but are not counted in inflation.

    Opps, rates better not go up! Ben promised it would stay stable. Is he in control?

    I did re-finance mine at 3 1/8%. After all, with trillions of new government debt, what I pay in 10 years will seem silly small.

    So, I buy $700 a month in silver this year. It use to be the amount in my home loan just for interest, now it is an *element* in my savings plan.

  • Report this Comment On June 30, 2013, at 10:11 PM, FiatDebtHolder wrote:

    It isn't just Chinese buying homes. In Fla, the S Americans are buying anything. Who would want to hold paper S American dollars?

    It is a race to who can print the most for all countries now days.

    Problem with real-estate when governments are really hungry? They can be taxed, they can't be relocated to a better tax area, and it isn't liquid if the taxes are high.

    Big city bond defaults are just getting warmed up. Those houses are the City's debtors' collateral.

  • Report this Comment On July 01, 2013, at 8:39 AM, mikecart1 wrote:

    A few years ago I gave a speech to a standing ovation about why buying a house is the worst investment you can ever make. I still stand behind that speech.

    The total return annually historically minus inflation is actually ZERO and this important fact is always left out for some reason haha.

  • Report this Comment On July 02, 2013, at 7:59 PM, lwdeboer wrote:

    Borrowing is USA policy since the McKinley Tariff of 1890.

    We put Iraq and Afghanistan on the old TAX Credit card and refused to raise taxes to pay for the war. We eliminated the Treasury surplus with Tax cuts and kept them through the last 10 war years.

    That spending made lots of people happy.

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