No Housing Recovery In These Three Charts

One day, we hope, the broader public will realize that just as the Libor scandal was largely precipitated by the fact that it was a self-reported number and thus open to collusion and manipulation by the same people who set it, so any data coming out of the National Association of Realtors - an organization that by definition benefits from high prices and frenzied real estate activity - is total manipulated garbage (in fact courtesy of the massive 2011 restatement from the NAR several months ago we know just that). In fact, when it comes to the NAR, it is worse: as a reminder, US real estate transactions are nothing but glorified and perfectly legal money laundering, which is the main reason why the NAR has a waiver from regulation for anti-money laundering. Although unlike HSBC, the NAR's money laundering at least leads to benefits for everyone, in the form of perpetuating the delusion that US real estate is fairly priced in when a few robber barons from around the world become indiscriminate marginal price settlers eager to put their money in the "safety" of the US. And lately, with the latest forced delusion being that US real estate has bottomed and is rising even as the global economy is decelerating at the fastest pace in the past 3 years, the NAR serves a handy purpose: it provides a reflexive way of misrepresenting the underlying trends in real estate, suckering the marginal fool in once again, as it did throughout the period between 2000 and 2007. The question then is what does objective, unmanipulated data say. As the following three charts from Bloomberg confirm the last word one should use when discussing the US housing market, where as we already pointed out shadow inventory is once again building up while construction jobs have tumbled to decade lows, is "bottomed."

From Bloomberg Brief:

Key housing barometers are all moving in a sideways direction, implying neither definitive improvement nor continued deceleration.


The most leading of the housing/construction indicators is the American Institute of Architect’s Work-on-the-Boards survey. During June the headline Architecture Billing Index (ABI) was mired in contractionary territory with a reading of 45.9. This was the third consecutive sub-50 posting. This isn’t very surprising since executives have been quite vocal with respect to concerns in Europe, China and the increased potential contagion in the U.S. The CEO Roundtable sent a letter to Congress citing these three issues. In addition, a sizeable number of complaints were found in the Bloomberg Orange Book.


Lumber giant Universal Forest Products’ CEO Matt Missad said in the company’s latest earnings conference call, “We are watching our inventories closely and trying not to get too far ahead because we are concerned about disappointing employment figures and lack of  construction growth in the U.S.”


Rather than observe the trends in the Mortgage Bankers Association’s headline Mortgage Applications Index, which includes refinancing, a far better gauge of economic conditions is the Mortgage Purchases Index trends. This weekly representation of demand for mortgages related to home buying is little changed from levels registered at the bottom of the housing market collapse.

The level of residential housing construction is an important indicator, and has made little improvement since the apparent market bottom in 2009.


The sunken pace of residential construction spending in May was $268 billion – essentially the same levels seen in 1997. This  profoundly low level of activity is not limited to the residential sector; spending on commercial structures is currently the same as in 1996.


Since there is diminished activity, the need for workers in the construction industry has also stagnated. During June construction employment totaled 5.5 million workers – a near 30 percent decline from the peak in April 2006 and the same number as in mid 1996.


The Federal Reserve has kept its overnight borrowing target at near zero for more than three-and-a-half years. As a result, mortgage rates are at all-time lows with the average 30-year fixed rate lingering around 3.53 percent. Since adopting this accommodative policy there has been essentially no improvement in the level of new home sales.

And finally, here is the NAR's reflexive feedback: existing home sales:

Existing home sales have improved somewhat, but remain a far cry from pre-recession and pre-bubble levels. The gain is likely a function of the “haves” grabbing the foreclosed properties of the “have-nots.” This is proof that the Fed may be able to lead the horse to water with lower rates, but scant few are drinking up.

In other words, instead of "housing recovery" a much better phrase would be "the rich are getting richer", and everyone else can go suck a lollipop and watch their wealth evaporate courtesy of Z/NIRP.