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New Home Sales Spike Nothing But "Borrowing" From Future As Stimulus Expires
Last week's number one soundbite on CNBC was the increase from the all time bottom in new home sales. What they did not focus on was the reason for this. Here it is, courtesy of David Rosenberg.
With a month to go before the homebuyer tax credit expires in the U.S., surprise, surprise, we see a ripping 27% MoM surge in new home sales, to a 411k annual unit rate (steepest increase since April 1963). However, even with that marvelous March result, in Q1, new home sales still managed to slide at a 14% annual rate. Nonetheless, homebuilding stocks and copper prices took off and bonds lost ground; however, it would be so much more impressive if it wasn’t so transitory.
As was the case last fall — ahead of what we all thought was the end of the first-time homebuyer subsidy, not to mention the same impact cash-for-clunkers exerted on auto sales late last year — what we have is a brief surge in activity to be followed by a prolonged lull. To put this into perspective, keep in mind that the March figure followed four months of deep disappointment. In fact, the level of new home sales is basically the same as the consensus believed we would be at by now when you look at the monthly growth estimates heading into the data releases since last December.
The fact of the matter is that even with the tremendous amount of policy stimulus, home sales are still down around 70% from their pre-recession highs. The fact is that it is still taking a record median 14.4 months for homebuilders to locate a buyer upon completion of the unit. In addition, the fact that median home prices fell 3.4% last month (average prices slid 11% in the second sharpest monthly decline in the 35-year history of the data series) is testament to the view that demand is still experiencing trouble keeping up with the available supply.
None of this is of course relevant, as the question du jour is whether you bought your 4th washer/dryer combo in the past week. More importantly, have you rented a CAT excavator to level your neighbor's empty but unforeclosed house yet? Most others seem to have.
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Is it any wonder that Rosie now writes this trenchant analysis from Canada. He should sign off his future missives with "The man too honest he was exiled from the U.S."
Wait, CNBC isn't Canadian NBC?
Then what's with all the day time drama?
+1
CAT excavator? damned funny
The new home buyer credit will fuel the market for the next month or two. Remember, the April 30th deadline is for a signed contract. Actual closing must occur before June 30 (i think). I think you will need to wait until the july and later reports come out before you will get bad news that could slow the climb to 36,000.
How many signed contracts will pass the underwriting? The number that close will be less than the number signed. Probably a lot less.
Perhaps. But like I said, we will need to wait until mid-summer for those numbers to come out and the market to respond.
I'm pretty sure for a new home sale, it's when the contract is signed, not closing. This was "the number".
Depicted graphically by Wapo last week:
http://www.washingtonpost.com/wp-dyn/content/article/2010/04/22/AR2010042203410.html?hpid=topnews
If this isn't a text book example of 'mortgage burnout' on the real estate market as a whole, I don't know what is.
Rosie when was the last time you made a correct prediction?
whoever you are, dont make this big a fool out of yourself
coming out of steep plunges, the economy historically bounces 7% or more
this is the only "recovery" in history to be aided by 0% interest rates, a tripling of the Fed balance sheet and explicit transfer payments to subsidize consumption (housing, autos, appliances)
Ok? So, historically with NONE of that crap applied, the economy usually bounces about 7% off a swan dive
Off this swan dive, WITH all the crap thrown in (which hasnt worked, but will have to be paid back), the fastest rate of economic growth we gonna get is 5.6%, of which close to 4% was inventory restocking
and for good measure, note the last economic cycle was first in US history in which the downturn destroyed more jobs than the prior upturn created -- and now we going into this "upturn" with 10% unemployment and no hope at all of getting employment back to where it was in 2007
If you are one of those idiots that is running around saying "hey look how much stocks are up I guess things are a lot better", then you might as well work at the Fed, because neither you nor they have learned a single thing from 10 years of economic catastophe.
Perhaps you should go back and read Rosies' sucker rally articles from a year ago and then make your comment. He's a smart guy but has been consistently dead wrong on equities in the past year and those who embraced his point of view on equities are likely looking in the mirror and referring to themselves as idiots.
Equities don't really matter, if you are umemployed, thus unable to buy said equities, because the economy is in the s#!tt3r.
#1. you spelled anonymous wrong. not sure if that is intentional, sure hope it is.
#2. my point is very basic - the S&P was like 900 or so when he said that (believe it or not, everyone on the planet read that, you didnt get exclusive access to that note). smart people said it earlier than that. the point isnt where the market is right now, its where does it end up. you think when this goes, it will stop at 900? you think it will stop at 667?
your argument is no different than the stupid drivel thrown out in 2000 at nasdaq 4000, which went to 5000, then went to 1000. or in 2007 when s&p went from 1400 to 1550, then went to 667 in the blink of an eye.
look im sure youre the smartest guy in your on line stock chat website, but use your head a little. does the fact that prices have this far divorced themselves from economically reality mean the concerns were and are misplaced, or that the ultimate pay back from pursuing the same misguided policy absurdity will be substantially worse than current contemplated?
f. you'd be better off directing your angry rants at someone like Leo he always has clever comebacks that reference certain parts of the anatomy - to flail about on your keyboard responding to someone who cannot even spell anynonmous is really poor use of your writing skills and obvious insight.
cheers
It IS a sucker's rally--the mother of them all, in fact. The fundamentals all point down, and have the whole time. It is merely being driven up by liquidity. Even a child should be able to see this.
Buying this rally is like buying the '33 rally. You have a 99% chance of getting slaughtered. That's unless you time to the top perfectly, cash out 100%, and get out of the dollar before it all collapses (you have to judge the top in terms of gold--and this has likely already passed). This is going to be a hyperinflationary depression.
Wait till the anti-illegal rallies cause unmitigated inflationary pressures !!
Way to go Arizona. Very progressive.
We'll just give the illegal immigrants free homes to placate them. It will be called Bunkers for "Beaners" (borrowed from Carlos Mencia).
Why Has Durable Goods ex autos surged? Quite simply tied to the cash for appliances which in many states launched April 1st. However, just like autos plunging post the rebate expiring or running out of funds this trend will reverse probably in June/July when many states will run out of $300M total funds available. We are seeing the latter stages of the positive impact of the housing credit as well this month as that ends in April. Does this point to the mantra is this as good as it gets….answer is point to yes economically. This mini economic boom in 1Q and in part 2Q has been once again engineered by the govt stimulus which as peaked.
In addition to the above, Calculated risk has a very revealing set of charts concerning new home sales that tarnish the rosy picture that the big media are lately serving to the public with ever swelling pomposity.
The latest from Rosies' alter ego'
From the Mall to the Docks, Signs of ReboundPETER S. GOODMAN
"At malls from New Jersey to California, shoppers are snapping up electronics and furniture, as fears of joblessness yield to exuberance over rising stock prices. Tractor trailers and railroad cars haul swelling quantities of goods through transportation corridors, generating paychecks for truckers and repair crews."
http://www.nytimes.com/2010/04/26/business/economy/26econ.html
In defense of Rosie how could he possibly compete with a propaganda machine that produces articles such as the above, but he should have had more confidence in the American consumers' insatiable need to buy buy buy and the airworthiness of Benny's Sikorsky.
I live in southern arizona and i can tell you the az anti-immigration bill has awful timing. At the same time the housing credit expires youre seeing an exodus of immigrats out of az and into ca and tx. AZ is the only state that requires employers to verify the immigration status of employees, and the new bill now requies that if you hire a day laborer you have to verify their status too. Watch home prices in AZ plummet.
Honestly, this has gotta have the bond market folks completely scared (if AZ is starting a trend). But as everything bonds are in gaga land.
I'm having a hard time finding fault in what AZ did. Why should we turn a blind eye to illegal immigration? It's clear the federal government wants to ignore it, but border states don't. Legal immigration is still perfectly legal.
Yes, either you have rule of law or you don't. Furthermore, illegals are creating significantly to the local, state, and national fiscal problems, and also getting illegal social security under a deal Bush agreed to.
Since I had the foresight to be born of pasty-white European immigrant stock, I could probably walk around any Arizona city without fear of being stopped by the next cop I meet asking for proof that I am an American. Unfortunately legal immigrants, naturalized, and even multigenerational American born citizens are going to have to get used to this treatment if they "look Mex" and are foolish enough to stay in that state.
Oh wahhh.... you mean the legal immigrants might have to take 2 minutes out of their day to show ID in a plan that might FINALLY catch the illegals?
Let's look at the cost/benefit:
Cost: Legal immigrants will have to spend two minutes of their day showing ID
Benefit: We get to finally deport hundreds of thousands to millions of illegal immigrants that ruin the economy, commit crimes, and other things.
Looks like the benefits outweigh the costs to me!
You'd think that the legal immigrants would be all too willing to comply to help this country.
There comes a point when you have to think beyond "what will it do to real estate prices". The fact is that illegal immigrants are competing with the 15 million unemployed legal U.S. residents for whatever jobs are available. Plus, the offspring of illegal immigrants and their (taxpayer funded) heathcare and education expenses are a major drain on hemmoraging state budgents.
Hey I take umbrage at that CAT excavator remark! My neighbor still lives in his yet to be foreclosed home.
I find myself wondering why there are ANY home sales. What sort of idiot buys into a collapsing market? Then I remember I was married once. For those who have not tasted marital bliss, it goes something like this.
" I want a house now, Elmer, what is it you don't understand about now, now, NOW?!
Hence, the ball gag...
More importantly, have you rented a CAT excavator to level your neighbor's empty but unforeclosed house yet? Most others seem to have.
I'd prefer a Komatsu and my neighbor's house isn't empty (they paid cash). Unfortunately, love thy neighbor does not exist for me since they moved in.
.
Never combine weed with Kool aid
http://finance.yahoo.com/tech-ticker/the-bears-are-wrong-%22the-consumer...,^dji,^gspc
Spoke to a realtor just yesterday about a house we were interested in buying that just came on the market this weekend. She was in the process of convincing the owner to remove the listing unless an offer came that weekend itself, saying the listing came "too late" to take advantage of the home buyer's credit and didn't want the listing to show up with excessive days on the market (I'm guessing as a natural result of demand drying up after the end of the credit).
Moving from the Shadows – More Distress Inventory Selling and Making it to Market in Southern California. Notice of Defaults Still High.
the only real time indicator that the MSM releases will be Weekly Mortgage Applications. home price indicators are delayed by 1-2 months. new home sales are recorded when the contract is signed so they will be delayed by 1 month. existing home sales are recorded when the contract is processed, so we should see existing home sales turn down last.
with the homebuyer tax credit ending this week, we will see the first signs of weakness in the Weekly Mortgage Applications.
sell in May and go away. or buy into the May-nia.
Anecdotal:
San Diego housing market very strong for a $200,000 condo,
six full price offers in a week!
From the nytimes article
"Spending power has been enhanced by a monumental reduction in household debt, which has shrunk by about $600 billion since the fall of 2008, according to Equifax credit data analyzed by Economy.com. That amounts to about $6,300 a household."
Hell, no wonder consumer spending is up!
Send all illegal immigrants home, our unemployment rate drop to zero overnight, problem solved and no need zero interest rate. But we need a JFK to do that.
Make being illegal illegal, make people work on the fields, in the backs of kitchens, on gardens, in auto shops, doing real jobs instead of sitting on a fucking computer desk watching tranny porn all day, and perhaps then they will realize hey, this work is harder than that imaginary fucking FIRE shit I was doing before the downturn of western civilization, and hey, maybe I need to get paid an actual living wage for doing ACTUAL shit that ACTUALLY needs to get done.
But that day won't come because we're America god dammit and we have a proud history of exploiting in every which direction until our implosion comes.