This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

U.S. Housing Is Right on Track -- That Is, if You're Rich

Stocks in this article: DHIHDLENPATKSHWTOL

NEW YORK (TheStreet) -- With the major U.S. indices reaching new highs almost daily, investors may have concluded that the U.S. economy has recovered. After all, unemployment levels have dropped to just 6.1%, inflation is in check and the Federal Reserve is winding down its generous bond buying program.

What else is left for Wall Street to do but fist-pump and proclaim, "mission accomplished"?

But the fact of the matter is that the U.S. economy is on shaky ground. Yes, unemployment is down, but the underemployment rate remains above 12%, wages continue to stagnate, and debt levels remain dangerously high.

Read More: Groupon Plunges: What Wall Street's Saying

Even the U.S. housing market, the so-called silver lining, is tarnished -- unless, of course, you have lots of cash and are buying high-end real estate. In fact, when it comes to sustained economic growth, U.S. housing could be the greatest hurdle in the economic recovery.

According to the Case-Shiller Home Price Index, U.S. housing prices are up more than 25% since the beginning of 2012. However, they still need to climb more than 20% to just reach their prerecession highs.

More specifically, in June, existing-home sales climbed 2.6% to a seasonally adjusted annual rate of 5.04 million from 4.91 million in May. On the plus side, this is the highest pace since October 2013; on the other hand, June existing-home sales are down 2.3%, below the 5.16-million-unit level reached last year.

First-time home buyers, a benchmark for how well the U.S. economy is doing, accounted for just 28% of all purchases in May and June. The 30-year average -- and a number that economists consider healthy -- is 40%. For an economy that's apparently rebounding, the annual decline is worse. In June 2013, first-time home buyers accounted for 29% of all purchases, and in June 2012, the year the U.S. housing market started to rebound, they accounted for 32% of purchases.

Read More: Here's What It's Like to Work for Elon Musk of Tesla

Unfortunately, first-time home buyers continue to be squeezed out of the U.S. housing market by wealthy investors. All-cash sales accounted for 32% of existing-home sales transactions in June, up from 31% in June 2013 and 29% in June 2012.

What about new-home sales?

Same story, but a little bit worse. In June, new-home sales tanked 8% month-over-month and 11% year-over-year to a seasonally adjusted rate of 406,000. Amazingly, the data comes with a margin of error of plus or minus 12.3% month-over-month and 14.4% year-over-year. However, because newly built home sales only account for around 19% of all home buying activity, economists aren't too worried.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,399.67 +19.26 0.12%
S&P 500 1,904.01 +17.25 0.91%
NASDAQ 4,316.0740 +57.6360 1.35%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs