Media shocked by “unexpected” record low in new home sales
posted at 1:13 pm on February 24, 2010 by Karl
Yes, Reuters says the magic word:
Sales of newly built single-family homes unexpectedly fell to a record low in January, according to government data on Wednesday that hinted at potential trouble for the fragile housing market recovery.
Potential trouble? Really? Today’s figure is the worst since they started keeping records in 1963. As Daily Finance’s Joseph Lazarro notes:
[H]istorically, increases in home sales are strongly correlated with greater demand and an economic expansion — and decreases are linked to the opposite. However, government statisticians also caution that the new home sales figures contain a margin of error and are subject to revisions. Further, economists note that it typically takes three to five months to detect a trend, so investors should not read too much into data from one month.
Unfortunately, new home sales also dropped “unexpectedly” in December. That followed November, when new homes plunged “unexpectedly” to the lowest level since April. Indeed, new home sales have been trending downward steadily since August.
In related news, the Mortgage Bankers Association says that mortgage applications declined by a seasonally-adjusted rate of 8.5% last week. Michael Fratantoni, MBA’s Vice President of Research and Economics, attempts to place the blame on the snowpocalypse that gripped the East Coast. Similarly, the Associated Press pre-emptively blamed the weather for the latest drop in consumer confidence, which also turned out to be “unexpectedly” bad. But there were no blizzards in August, when the housing market started falling. Unemployment increased and remains persistently high. Very little of that has to do with the weather. As John Carney notes:
The story-book recovery was dependent on a recovery of the consumer and a decline in the saving rate. If consumers lost some of their apprehension about future income prospects and future employment, they might begin to spend more on both retail goods and to purchase homes again. Anticipating this return of the consumer, businesses would increase capital spending and inventory.
We got the last part, but not the first part, raising the possibility that the recovery on the business side will falter, sending the country into a double-dip recesssion. That this malaise is occurring despite the extension and expansion of the homebuyers’ tax credit suggests that Americans are casting a vote of no confidence in Obamanomics.
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