More from Mark Hanson on today’s “better than expected” new homes data. Be VERY careful taking the NAR’s data at face value:
Below are two new charts I just threw together. The first is of monthly Existing Home Sales from 2005 through 2009. The second is of Jan through July ytd sales going back 5-years.
In the first chart below look at the black circle. That red line (2009) a little bit over the yellow (2008) represents 2009 beating 2008 by 45k sales in total for June and July. From Jan to May, 2009 was the weakest year in years. Ok, I get it — -after so many years, we finally have a beat. But look at what was thrown at it in order to get this rounding error. We have thrown in over a trillion dollars to buy rates down, countless $8k tax credits, mortgage mods, foreclosure moratoriums plus hundreds of billions more, and it only bought 45k yoy additional sales over June & July combined. After a 50% to 70% price hit in the hardest hit areas — that are also the busiest now — only 45k sales out 2.8 million sold this year are responsible for the national consensus that housing has bottomed, which is the golden key to the consumer recovery spending chest.
Don’t forget that conditions were absolutely perfect in the first seven months of the year with respect to prices, rates and supply. And from March to July seasonality is always a significant factor. Now, as we move out of the summer selling season the seasonality goes away and rates are at least 1/2% higher across the board now than the average for Q1 – Q2. In addition, low cost foreclosure supply has rapidly evaporated due to the servicers keeping it off the market on purpose and the Admin’s mortgage mod initiatives and scare tactics that have kicked a million foreclosures down the road to whenever.
The biggest problem in the chart below is second half 2008 sales. They remained very elevated relative to the sharp drops seen in previous years going out of the season. They set 2009 second half sales up for the perfect national miss. The Western Region already missed badly this month. As discussed in the first report below, the National monthly sales would have missed if 16k extra mystery condos had not sold in the Northeast region.
Today’s Existing Sales report was as close as it gets. The NAR’s annualized seasonally adjusted slight of hand made the beat appear bigger than it really was. Be careful going forward — with strong consensus that housing trouble is in the rear view mirror a miss next month could produce an outsized reaction.
Source: Mark Hanson Advisors