Transcripts

"Two Ways to Play"-Kevin Depew of Minyanville

SUSIE GHARIB: Is the housing market finding a bottom? There are two ways to answer that in tonight's "Two Ways to Play". Here's Minyanville's Kevin Depew and Kevin Depew of Minyanville.

KEVIN DEPEW, MINYANVILLE: On Wednesday, the Commerce Department reported much stronger than expected new home sales, the first monthly rise in seven months. And earlier in the week the National Association of Realtors reported an unexpected rise in existing home sales, which make up the vast majority of housing activity. Together these reports are signaling a stabilization of the housing market, a key leading indicator for the economy and the stock market. Indeed as of today, the stock market is up more than 10 percent this month. Finally, after two years of disastrous economic news, there's light at the end of the tunnel. They say real estate is about location, but the economic reality is that it's all about price and supply. Let's talk about price first. If housing sales are stabilizing, it's only because price is plummeting. Existing home prices are declining at a 15 percent year-over-year rate. New home prices at nearly 20 percent. Meanwhile, supply remains near record highs. Let's be clear. Stabilization is not the same as growth. If housing is indeed a leading indicator for the economy, then we are now entering the heart of home price deflation, where sellers have no choice but to lower price dramatically.