Submitted by Jeffrey Snider – Alhambra Investment Partners
I haven’t reported much on the housing market this year because frankly it has been vastly surpassed by everything taking place (globally) with the “dollar” and the economy that seems stapled to it. However, November’s resale figures from the National Association of Realtors (NAR) have alarmed several lines of commentary normally more assured (friendly to the orthodox recovery). The rate of sales dropped to a 19-month low in November, down 10.5% from October. It’s a large drop but I’m not sure why this wasn’t more widely expected.
U.S. home resales posted their sharpest drop in five years in November, a potential warning sign for the health of the U.S. economy although new regulations on paperwork for home purchases may have driven the decline.
The National Association of Realtors said on Tuesday existing home sales plunged 10.5 percent to an annual rate of 4.76 million units. That was the sharpest decline since July 2010. October’s sales pace was revised slightly lower to 5.32 million units.
Housing has been providing a sizable boost to U.S. economic growth this year as a strengthening labor market and low interest rates have helped young adults to leave their parents’ homes.
Regulatory paperwork is plausible, but that last paragraph is surely overstating housing greatly. If there is a factor that has been driving home sales this year it isn’t jobs and wages, and certainly not college kids leaving their parents’ basement. First-time home buying is still less than 30% even though mortgage rates have been historically low and rather tame. I do think, however, that rates are the reason we have seen this pattern in activity – people have been hearing all year that the Fed was about to raise rates and so they rushed to borrow in order to buy before all that gets undone.
Submitted by Pater Tenebrarum – The Acting Man Blog
Hiking Into a Slowdown
It becomes ever more tempting to conclude that the timing of the Fed’s rate hike was really quite odd, even from the perspective of the planners – even though the U3 unemployment rate has fallen to a mere 5% and they are probably correct about the transitory nature of the currently very low headline “inflation” rate (as we have recently pointed out, actual monetary inflation currently stands at almost 8% y/y).
Image credit: Fotolia
Recent economic reports have by and large not shown any noteworthy improvements – on the contrary. District manufacturing surveys are going from bad to worse, existing home sales just had another truly terrible month (this time bad weather can obviously not be blamed, but apparently there is a problem with filling in simplified forms) and even the Markit services PMI has suddenly undercut the entire range of economists’ expectations. Meanwhile, the growth rate in ECRI’s coincident index has just hit a 21-month low:
ECRI’s coincident index growth rate keeps falling. The weekly leading indicator has recovered from its lows(while remaining in negative territory), but we dislike the fact that this indicator is evidently strongly influenced by the stock market. In our opinion the stock market has long ceased to tell us anything about the economy. Continue reading
Submitted by Raúl Ilargi Meijer – The Automatic Earth