Pretty negative data out this morning. The one bright spot was consumer sentiment which came in better than expected. The Michigan survey showed consumer confidence jumped to 73.5 which was substantially higher than the 70.2 reading analysts expected. More important were the durable goods and housing data.
Durable goods orders came in well below expectations at -2.4%. Analysts had expected a 1% rise. We wouldn’t read too much into the negative figure, however, as durable goods have a tendency to be volatile on a monthly basis. In addition, the data is skewed by the auto sector. Econoday reports:
The latest durables report showed August pulled down largely by nondefense and defense aircraft orders. Also, motor vehicle orders did not rise as much as many expected after the cash-for-clunkers program drained auto inventories. A key point that should not be overlooked is that the government survey sample may not have picked up all of the activity in autos. We likely will get stronger numbers (including revisions) for autos in the next report or two. Basically, the latest durables numbers acted as a reminder that in a sluggish recovery, the monthly numbers are going to be choppy. On the release, Treasury prices rose and equity futures dipped.
The most disturbing news of the day comes from the housing sector. The seasonal slowdown in real estate appears to be taking hold. New home sales came in well below expectations at 429K. Analysts were looking for 445K. The latest data shows that home prices are continuing decline. Econoday reports:
There has been some hope based on Case-Shiller data that home prices were bottoming, but price indications from the latest new and existing home sales reports show further deterioration. The median price of a new home tumbled 9.5 percent in August to $195,200 for the lowest level since 2003, an indication that homebuilders are giving customers big concessions. The median price of an existing home fell 2.1 percent in August. But low prices are moving homes off the market which is a big plus for future sales and future prices. New homes on the market fell 3.0 percent in the month to an adjusted level of 262,000, making for 7.3 months of supply at the current sales rate which is the lowest level in more than 2-1/2 years.
All in all, the latest round of negative housing data is quite alarming. As we’ve been warning for months, this slowdown in housing was largely expected despite the numerous calls for a housing bottom. Anyone looking for a v-shaped recovery in real estate is likely to be disappointed.