More data that demonstrate that whatever recovery was initiated by the porkulus, cash for clunkers and the new home buyer tax credit is pretty much over. The latest comes in the form of existing housing sales, which hit a 15-year low. Economists polled by Reuters expected a rate of 4.70 million units. Analysts polled by Dow Jones expected similar numbers.
I expected much worse, but even my grim forecast was beaten on the downside.
WASHINGTON—Existing-home sales plunged to their lowest level in 15 years in July as inventories soared, painting a grim picture for the housing market absent government support in a stubbornly sluggish economy.
Home resales dropped a record 27.2%—nearly twice as much as analysts had expected—to an annual rate of 3.83 million in July, the National Association of Realtors said Tuesday. Meanwhile, inventories rose to 12.5 months from 8.9 months in June, pressuring already depressed home prices. Inventories are at their highest level in more than a decade.
"Historically July is the peak inventory month in any given year," NAR Chief Economist Lawrence Yun said.
Economists surveyed by Dow Jones Newswires had expected existing-home sales to fall by 14.3% to an annual rate of 4.6 million.
Calculated Risk has a much more detailed post on the housing sales data, especially regarding what the inventory of homes means going forward. It’s not pretty. Succinctly, rising inventories and falling sales mean increased downward pressure on prices, which pushes troubled mortgages further underwater. A healthy economy typically has around six months’ worth of inventory. These days, the inventories would last twice as long given the current rate of sales. That is ominous, especially in the context of nonexistent private sector employment gains. Rumblings of a second mortgage crisis are going to gain air time and bandwidth, as is the increasing likelihood of a double-dip.
The rest of this week is going to be busy, in terms of economic data. On Wednesday, durable goods, new home sales and the index of mortgage applications will be reported. Thursday brings the weekly jobless claims figures (probably headed north after last week’s aberration) and Friday brings the first revision in second quarter GDP.
All of these data can be market movers, especially if they all point in the same direction. Given the paucity of good news lately, I don’t expect many of these data to bring smiles to the faces of the PTB.
Wreckovery Summer appears to be over, and the consequences for Democrats come November are going to be bloody and merciless.