Buying and Selling: Bombs Away

Another day, another housing slump report from the National Association of Realtors. Now, let's see if we can puzzle this out:

New home demand is slacking, but new home construction is rising.

The Commerce Department recorded a spike in new home demand for May.

And now the NAR says that existing home demand is slumping. So, what have we got?

It literally doesn't make sense. Homebuilders are flooding the market with inventory, but demand for new and existing homes is dropping, except when it isn't. We need some serious macro-level economic analysis to make heads or tails of these insanely conflicting reports. Luckily, Mish's Global Analysis is on the case:

U.S. MAY NEW HOME SALES UP 4.6% TO 1.23 million VS 1.15 million EXPECTED
U.S. NEW HOME SALES down 5.9% in past 12 months
U.S. April NEW HOME SALES revised lower to 1.180 million

One must use caution in interpreting the above sales data. The data does not include cancellations yet cancellations have been skyrocketing at many homebuilders lately. In addition we have been seeing housing inventory numbers go up month after month. More and more people “want out”. It simply is not possible at these prices. This will just add to price pressures down the line. For now, local economies are still being supported by all this construction activity but when it ends, the jobs will go with it. Add it all up and talk of a "soft landing" is pure nonsense. Let's see where we land first, and then we can talk about how soft it was.

True indeed. It pays to know all the facts, now more than ever. That means parsing all the data you can find and doing comparisons the same way you would when purchasing a house itself. Take no one source as gospel, and don't let anything or anyone claim that they are the authority when it comes to real estate. Homebuilders want the boom to continue, because as long as those contracts don't get canceled, they make money. Realtors want to deny the existence of a slump, just as flippers, speculators, and hoodwinked owners do.

But the other shoe is ready to drop, and it'll come down like Fat Man and Little Boy.

Posted at June 27, 2006 02:10 PM

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Another day, another housing slump report from the National Association of Realtors. Now, let's see if we can puzzle this out: New home demand is slacking, but new home construction is rising. The Commerce Department recorded a spike in new home demand for May. And now the NAR says that existing home demand is slumping. So, what have we got? It literally doesn't make sense. Homebuilders are flooding the market with inventory, but demand for new and existing homes is dropping, except when it isn't. We need some serious macro-level economic analysis to make heads or tails of these insanely conflicting reports. Luckily, Mish's Global Analysis is on the case: U.S. MAY NEW HOME SALES UP 4.6% TO 1.23 million VS 1.15 million EXPECTED U.S. NEW HOME SALES down 5.9% in past 12 months U.S. April NEW HOME SALES revised lower to 1.180 million One must use caution in interpreting the above sales data. The data does not include cancellations yet cancellations have been skyrocketing at many homebuilders lately. In addition we have been seeing housing inventory numbers go up month after month. More and more people “want out”. It simply is not possible at these prices. This will just add to price pressures down the line. For now, local economies are still being supported by all this construction activity but when it ends, the jobs will go with it. Add it all up and talk of a "soft landing" is pure nonsense. Let's see where we land first, and then we can talk about how soft it was. True indeed. It pays to know all the facts, now more than ever. That means parsing all the data you can find and doing comparisons the same way you would when purchasing a house itself. Take no one source as gospel, and don't let anything or anyone claim that they are the authority when it comes to real estate. Homebuilders want the boom to continue, because as long as those contracts don't get canceled, they make money. Realtors want to deny the existence of a slump, just as flippers, speculators, and hoodwinked owners do. But the other shoe is ready to drop, and it'll come down like Fat Man and Little Boy.