When nearly two years ago everyone jumped with joy after the US housing market posted its latest uptick, the fourth since Lehman, with all previous three promptly fading as dead cat bounces always do, the permabulls were quick to bet that "this was the recovery we've all been waiting for", ignoring such simple concepts as QE3, the record scramble by foreign oligarchs to use US real estate as a dirty money laundry, the Fed's housing subsidy with REO-to-Rent (which promptly made Blackstone into America's largest landlord), and the fact that banks then (and now) still refuse to dump millions of foreclosed homes back on the market over fears what the supply surge would do to prices. We noted all of this at the time, and said it was only a matter of time before this 4th consecutive dead housing bounce fizzles.
Now, that we have seen nearly a year of declining existing home property prices, a collapse in transaction volumes, and a new home market that is catering solely to the rental segment, this has been confirmed.
But that's not all.
As we showed a week ago [10], it is not just the coincident housing signals confirming that the latest artificial bounce has faded, but both upstream and downstream indicators. Specifically, we showed that lumber prices - that one component so critical in the building of new homes and a traditional leading indicator - have cratered.
[11]
[12]
That's the upstream indicator.
As for the downstream, we go to Bank of America which finds that not only has home improvement store spending declined substantially since the dead housing bounce peak last summer, but that furniture spending according to BofA estimates, is now once again negative: the first such drop since early 2012.
From BofA Michelle Mayer, who very soon will also have to change her tune from 2012 proclaiming the housing collapse over and a recovery is just beyond the horizon.
Spending in home improvement stores ticked up in May, but the pace of spending on a yoy basis has slowed substantially from the cyclical peak in November 2013.
[13]
Spending at furniture stores had picked up over 2012 through early 2013 but has been on a downward trajectory since last fall. Sales actually slipped into negative territory on a yoy basis in May, showing weakness into the spring season. This weakness is consistent with a wide array of indicators on the housing market, including Census Bureau's new home sales as well as weak household formation data.
[14]
But what by far worst for reality deniers is that with QE fading, there will be no additional stimulus to push all important housing away from the upcoming drop and into its fifth "dead housing bounce." Unless, of course, the Fed has no choice but to untaper and unleash even more trillions in liQEdity once the latest version of QE (we forget if it is 3 or 4) ends and is found to not have generated any "self-sustaining", escape velocity growth in the US economy yet again.