The incredibly cheerful (cheerleading?) media reports on the latest housing numbers are disconcerting. [CNBC of course: "Sales of new homes jumped 11 percent in June, the biggest monthly gain in eight years, the Commerce Department said on Monday, in another sign that worst housing market since the Great Depression may be gaining some footing," but even the Wall Street Journal sadly participated as well: "Standard & Poor's Case-Shiller index, which tracks home prices in 20 metropolitan areas, rose 0.5% for the three-month period ending in May, compared with the three months ending in April. It marked the index's first increase after 34 straight months of decline, and came after a variety of housing indicators has shown glimmers of hope for the past several months."] My concern lies in the fact that the articles do not analyze the numbers in any proper perspective but focus only on the monthly change.
As regular readers of this blog know, this author is neither a financial industry cheerleader nor an eternal pessimist. The goal here, as always, is to rationally analyze data so that readers may make informed investment decisions. The problem with the media coverage focusing on the monthly change is that it ignores long-term trends in favor of short-term satisfaction.
As market analyst Barry Ritholtz notes on his blog, The Big Picture, new home sales are the slowest they have been since 1982 (see chart below). The market may be stablizing, but recovering? The facts are not present to draw that conclusion.
From The Big Picture:
“As Floyd Norris noted, ‘This was the second-worst June since they began counting new-home sales in 1963. It was not quite as bad as June 1982, when the country was mired in a deep recession and interest rates were sky high. Then 34,000 new homes were sold. There are twice as many households in America today as there were then, so relative to population this was the worst June ever, by far.’”
Given that durable goods orders for June were reported this morning falling 2.5 percent, the stock market may have reached its high on the “hope” rally. Be very careful here, as expectations for a quick and strong economic recovery have seemingly sprung out of nowhere and now place the market in jeopardy of another drop when those expectations are broken by the facts.
For more information on the state of the housing market, please click on the “Housing Statistics” page on the menu bar above.
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Gregg D. Killoren
victoria1014
Analysis of the June 2009 Housing Statistics
The incredibly cheerful (cheerleading?) media reports on the latest housing numbers are disconcerting. [CNBC of course: "Sales of new homes jumped 11 percent in June, the biggest monthly gain in eight years, the Commerce Department said on Monday, in another sign that worst housing market since the Great Depression may be gaining some footing," but even the Wall Street Journal sadly participated as well: "Standard & Poor's Case-Shiller index, which tracks home prices in 20 metropolitan areas, rose 0.5% for the three-month period ending in May, compared with the three months ending in April. It marked the index's first increase after 34 straight months of decline, and came after a variety of housing indicators has shown glimmers of hope for the past several months."] My concern lies in the fact that the articles do not analyze the numbers in any proper perspective but focus only on the monthly change.
As regular readers of this blog know, this author is neither a financial industry cheerleader nor an eternal pessimist. The goal here, as always, is to rationally analyze data so that readers may make informed investment decisions. The problem with the media coverage focusing on the monthly change is that it ignores long-term trends in favor of short-term satisfaction.
As market analyst Barry Ritholtz notes on his blog, The Big Picture, new home sales are the slowest they have been since 1982 (see chart below). The market may be stablizing, but recovering? The facts are not present to draw that conclusion.
From The Big Picture:
“As Floyd Norris noted, ‘This was the second-worst June since they began counting new-home sales in 1963. It was not quite as bad as June 1982, when the country was mired in a deep recession and interest rates were sky high. Then 34,000 new homes were sold. There are twice as many households in America today as there were then, so relative to population this was the worst June ever, by far.’”
Given that durable goods orders for June were reported this morning falling 2.5 percent, the stock market may have reached its high on the “hope” rally. Be very careful here, as expectations for a quick and strong economic recovery have seemingly sprung out of nowhere and now place the market in jeopardy of another drop when those expectations are broken by the facts.
For more information on the state of the housing market, please click on the “Housing Statistics” page on the menu bar above.
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