Although home-builder stocks tested new highs once again on the heels of this morning's housing data, I can't help but question whether the unrelenting euphoria is justified.
As the chart shows, we saw a similar pattern of data being reported during the period from late-2009 to early 2010, when existing home sales rose sharply amid a more subdued uptick in new home starts and sales.
In the end, the jump in the former proved to be temporary and appeared linked to an increase in foreclosures, short sales, and purchases by investment-oriented cash buyers, rather than to a change of heart by traditional homebuyers.
Moreover, while today's ultra-low borrowing rates undoubtedly aid affordability, there is still plenty of evidence that suggests prospective homeowners are finding it difficult or even impossible to get a mortgage.
That begs the question, of course, of whether this time is different. As usual, I believe the answer to that question is "no."
Michael J. Panzner
