Home prices and trends are thought to be a leading indicator of bank credit, and so we pause to analyze what 2018 is telling us and how it could impact our future in the banking industry. December existing homes sales came in at 4.99 million units or below the 5.24 million units expected. That continued the trend of weaker demand in 2018. Luckily, we can correlate much of that drop in demand and pricing to higher interest rates and inflated home prices against a backdrop of flat income.
While commercial real estate prices have been above last cycle’s peak for a while, the whole US economy, regarding production and employment, is now back at pre-recession levels. Here in Florida, we get a stilted, and overly positive, view of how the US is doing. When broken down, the recovery remains uneven with some states like Kansas, Connecticut, and others, just back to level.
No doubt you have heard the comparison discussed how our current economy now exceeds many economic levels of the peak of the last economic cycle. We wrote about this last month when we analyzed the various commercial real estate markets (HERE) as we equated the general economy to be in the proverbial bottom of the 7th inning.
This might be sign #367 that the next economic apocalypse is forthcoming, but homes that are bought and sold within a 12-month period are on the rise. Back in 2006, according to Trulia, home flips accounted for 7.3% of sales. Now, they account for 6.1%, the highest level since. More disconcerting is the metro patterns are similar with Las Vegas, Florida and Central California leading the way. 11 of these metro areas hit 17-year highs.