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Guest Post: New Home Sales - Not As Strong As Headlines Suggest

Tyler Durden's picture




 

Submitted by Lance Roberts of StreetTalk Live,

 

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Wed, 10/24/2012 - 17:54 | 2916938 NotApplicable
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In other news, seasonal volatility is waaaaay down.

Stability has arrived!

Wed, 10/24/2012 - 18:46 | 2916987 TruthInSunshine
TruthInSunshine's picture

Repeated from my post on prior article, as I know this industry well, and the level of deception promoted by cnBSc and other hopium pushers disgusts me.

This is an abysmal annual rate of sales even on a seasonally adjusted basis.

Remember that the annual rate of NEW HOME permits was 2.1 million units in 2006 [I mistakenly said sales previously, but there were 2.1 million permits issued for single family housing units in 2006, and I shall find the actual completed sales rate for that year and 2007, as well]. - edit: Quick & dirty check shows about 1.4 million new homes sold on annualized rate as of May, 2006: http://photos1.blogger.com/hello/243/2888/640/NHS7Aug2006.jpg

We are talking depression levels housing sales with these latest datum, so I can't fathom how any entity or person can trumpet this level of sales as anything that's remotely indicative of strength, let alone not indicative of extremely anemic.

Once one factors in the multi-unit residential sales, many of which are the result of subsidies from government agencies, both to builders and buyers, and then considering the rampant levels of mortgage fraud (...surprise!, It's back) not only in the new home market, but also in the existing home market (see "flopping" as an example), which has an impact on the new home sales' levels, this is an abomination.

FHA loans only require 3.5% down, and mortgage rates are at historic lows, and these are the best numbers new housing sales can post? AWFUL, and very revealing about how spectularly bad the actual economy truly is.

(I've also heard the meme from realtors and sheeple that existing houses are selling fast and inventory is constrained. Well, yes, that's what a massive shadow inventory sitting on GSE shelves-- and now the Fed's balance sheet-- thus reducing foreclosures AND inventory, along with underwater homeowners who would list their homes if they could afford to sell them, will do).

Consider also that the best season for new home sales (i.e. the actual transfer of the deed to owner or mortgage lender) is the period just prior to the start of school in late August through October (some people miss the back to school deadline by a few weeks or a month inevitably), and these sales' numbers are simply incredibly bad.

The most worrying aspects to these latest datum is that housing is now being talked about again as "taking the baton" from manufacturing as a core industry to lead U.S. GDP growth, when anyone who understands economics 101 knows definitively that housing is not an industry that should be viewed this way, given that its health depends on the true rate of growth in employment and wages elsewhere, and any attempt to portray the housing industry as anything other than dependant upon and derivative of the real health of the real, core economy, is absolute lunacy.

The housing bubble became a bubble because unit sales of new homes and their prices were rising despite the fact that jobs and wages in other key areas of the economy were being gutted, and a cycle then ensued that hid that destruction whereby people who lost jobs or suffered reduced income in non-housing sectors of the economy shifted into the housing sector, thus depending on ever increasing sales and prices in new homes to maintain their employment and income.

The housing market (especially new housing) is a derivative and NOT A DRIVING CAUSE of the true health and growth of the economy. So many pundits fail to grasp this relationship.  A prime case study of this is the Spanish housing bubble, which was epic, and which provides clarity as to how housing is never a sustainable driver of economic growth (if the economic growth isn't happening in sustainable portions of the economy, housing will collapse or remain comatose).

These equal depression level new home sales even if the highly massaged and manipulated headline number is assumed to be accurate (which, of course, it's not).

Wed, 10/24/2012 - 22:22 | 2917574 jeff montanye
jeff montanye's picture

you make several good points.  one i would like to elaborate (idea from john hussman):  the extreme constriction of inventory of used homes by the banks and the underwater owners makes the prices of used homes higher than they would otherwise be.  this makes the attraction of new homes greater than would otherwise be the case, making their numbers better and those of the existing home sales worse.  

Thu, 10/25/2012 - 00:19 | 2917780 emersonreturn
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truthinsunshine: +1

Wed, 10/24/2012 - 18:46 | 2917061 Cash2Riches
Cash2Riches's picture

The real estate market will be slow to dead for the next decade. Gold and Silver are the places to be.

 

Protect your wealth

Wed, 10/24/2012 - 18:05 | 2916949 DoChenRollingBearing
DoChenRollingBearing's picture

Tylers!  I wonder when THIS will be one of your big headlines, the MSM is finally paying attention...

 

"Four Died, and Obama Lied"

 http://tinyurl.com/8bp9bot

 

Wed, 10/24/2012 - 19:44 | 2917178 surf0766
surf0766's picture

Chris Tingle Mathews told that young man everyone knows it was the video.

Wed, 10/24/2012 - 18:14 | 2916974 news printer
news printer's picture
3 confirmed dead in Downey shooting

Three people are now confirmed dead after gunfire erupted near a Downey business today, and two others are in critial but stable condition — including a 13-year-old boy, police said this afternoon.

Wed, 10/24/2012 - 19:11 | 2917110 azzhatter
azzhatter's picture

as i imagined a lot of people putting houses on the market in my area. first sign of optimism i knew there would be a dump

Wed, 10/24/2012 - 19:35 | 2917163 Obamananke
Obamananke's picture

Truth in Sunshine I have been a contractor for 25 yrs and I agree with everything you stated

Wed, 10/24/2012 - 21:24 | 2917381 TruthInSunshine
TruthInSunshine's picture

Thanks.

I often find that the people who challenge me when I convey the points above cite as their main reason for doing so that they "see new homes being built," "know people buying a new home," etc. They may even claim to see "more new construction than last year" or "more buyers of new homes now than in prior years."

Those things they see aren't necessarily false (although they could be misleading, anecdotal things that allow them to more easily believe the misleading green shoots' headlines).

I often tell people that even during the worst of recessions and even depressions, there's still economic activity. There are still people eating at restaurants, buying cars and homes, and even investing. It isn't as if everything goes dark.

The main point is that when attempting to accurately judge the true state of health of the economy, real, accurate numbers matter. It's nearly meaningless to "see what appears to be more new construction of houses than last year" in one's city. It's far more telling to discover what the absolute number of new home sales are locally, regionally & nationally (not to mention the price points of homes sold, permits pulled, etc.).

I personally believe that new home sales, as anemic as they are on a national basis, are being propped up by unprecedented interventionism in the form of historic low mortgage rates, which is a product of radical central bank meddling with interest rates, direct government subsidies to both builders and buyers (the 1st time buyer home credit, as well as the current 3.5% down FHA loan, are two prime examples of this), and other forms of massive government stimulus, which merely pulls demand forward, thus nearly guaranteeing that nothing will stabilize, and no form of natural supply/demand cycle will return for a very long period. Everything will remain distorted, uneven and "lumpy," for lack of a better term.

And this all leads to massive uncertainty on the part of home owners, potential home buyers, potential home sellers, builders, lenders, etc.

Thu, 10/25/2012 - 03:03 | 2917886 Floodmaster
Floodmaster's picture

Well said.

Wed, 10/24/2012 - 19:42 | 2917174 surf0766
surf0766's picture

Housing is better. If you think it true , it will be true.

Is someone giving away free bongs?

Wed, 10/24/2012 - 22:54 | 2917644 Hubbs
Hubbs's picture

It all depends on the election.

Obama will spin the numbers as high as he can before the election.

If Obama wins, maybe a slow gradual unveiling how bad the numbers really are, say by Spring 2013.

If Romney wins, then he'll immediately try to spin the "real" numbers as low as he can, so that when it's time for his re-election bid in 2016 (if we still have a country), he can then spin them high again to make it look like he has made progress.

There. Now you can forget about all this Zero Hedge stuff and go back to the World's Series.

Thu, 10/25/2012 - 03:25 | 2917895 Floodmaster
Floodmaster's picture

This article is rubbish,I only trust real estate agent and economists employed by banks

 

http://ochousingnews.com/wp-content/uploads/2012/10/realtor_kool_aid.jpg

Fri, 10/26/2012 - 02:21 | 2920779 lmile61
lmile61's picture

Yes,changes are depend in seasonale and non-seasonable events and prices would be depend on this and also depends on election so people attract to that party and will get votter more for win...people need to understand that ajenda.

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