Logo Background RSS

Advertisement

Reflections On The Housing Recovery

  • Written by Syndicated Publisher No Comments Comments
    July 26, 2012

    New home sales unexpectedly plunged today, with the biggest drop in over a year.

     New U.S. single-family home sales in June fell by the most in more than a year and prices resumed their downward trend, suggesting a set back for the budding housing market recovery.

    The Commerce Department said on Wednesday sales tumbled 8.4 percent to a seasonally adjusted 350,000-unit annual rate, the lowest rate in five months. The percent decline was the largest since February 2011.

    May’s sales pace was revised up to 382,000 units from the previously reported 369,000 units, taking some of the sting from the report.

    Economists polled by Reuters had forecast sales at a 370,000-unit rate last month. Compared to June last year, new home sales were up 15.1 percent.

    Actual New Home Sales

    Reader Tim Wallace provides a look at actual new home sales, six-month running totals, not seasonally adjusted, not annualized, vs. prior years.

    click on chart for sharper image

    Reflections on the Housing Recovery

    Even with today’s reported decline, new home sales have likely bottomed on an annual, cumulative-total basis.

    However, don’t expect much in terms of recovery.

    Debt overhang is immense, and student debt is particularly problematic. Lack of jobs coupled with high student debt is capping family formation. Kids out of college are deep in debt and holding off getting married, starting families, and therefore buying houses.

    Moreover, home sizes will trend lower and price recovery will be anemic because of boomer demographics. Retired boomers looking to downsize have few buyers able or willing to buy.

    Bank-owned real estate (REOs) and shadow inventory are hugely underestimated. That too will pressure prices and sales.

    The good news is home sales will add to GDP.

    The more realistic news is structural headwinds are immense, demographics are poor, and job prospects for college graduates are poor. The bottom in new home sales may be in, just don’t expect anything close to a normal housing-led recovery, because it’s not going to happen.

    Mike “Mish” Shedlock
    http://globaleconomicanalysis.blogspot.com
    Click Here To Scroll Thru My Recent Post List

    Read more at

    http://globaleconomicanalysis.blogspot.com.au/2012/07/actual-new-home-sales-first-6-months-of.html#YycoDCqS2ptYSJmS.99

    Images: Flickr (licence attribution)

    About The Author

    Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.  Visit Sitka Pacific’s Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

    You are currently viewing my global economics blog which typically has commentary every day of the week. I am also a contributing “professor” on Minyanville, a community site focused on economic and financial education.  Every Thursday I do a podcast on HoweStreet and on an ad hoc basis contribute to many other sites.

    When not writing about stocks or the economy I spend a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com.
    Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInPin on PinterestShare on StumbleUponShare on RedditShare on TumblrDigg thisBuffer this pageFlattr the authorEmail this to someonePrint this page

Advertisement