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More progress in the housing market





January data released today on existing home sales continues to support my contention that the housing sector is in recovery mode. In the top chart we see that misbegotten government efforts to stimulate housing sales (e.g., rebates) only made sales more volatile—pushing sales up in late 2009 only to depress them in 2010—but not any stronger. Over the past year we have seen some genuine improvement, with sales up about 10% from last February. As the second chart shows, with the pickup in sales activity and a modest decline in homes being put up for sale we have seen the months supply of unsold homes drop to a new post-recession low. The situation today looks better even than it did in the mini housing bust of the early 1980s. The housing market is making real progress, even though it is still in bad shape. It's not the level of home sales that counts, it's the change on the margin, and that is positive.

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