Will Existing Home Sales "Inspire False Hope?"
Scott Patterson in today's WSJ writes:
"The housing news has been so grim for so long that investors seize on any data that is less than disastrous as a sign of a recovery right around the corner.
That is a risky bet based more on wishful thinking than common sense. With the economy teetering on recession, credit tight and the labor market weakening, odds are that housing will keep getting worse before it starts to get better.
Tuesday's National Association of Realtors' report on existing-home sales in March will test investor thirst for good news. Economists surveyed by Dow Jones forecast that March sales will drop 2% from the previous month. If the report is better than that, expect to hear talk about more lights flashing at the end of the tunnel."
The WSJ article looks at 3 factors that are continuing to impact Home
Sales: Falling prices,a weakening labor market, and very tight credit
Despite those three very real concerns, I am going to make a bold forecast: Existing Home Sales (untis, not price) may very likely to increase when reported today at 10am.
An even bolder forecast: Existing Home Sales may very likely to show increases in total homes sold each and every month from now through August.
Why? As we have discussed before, its the Seasonality factor.
Have a look at this chart:
That explains the month to month permutations, and why you need to look at year-over-year data.
(more on this later today)
Existing Home Sales, Non Seasonally Adjusted, Explained
Home Data May Inspire False Hope
WSJ, April 22, 2008; Page C1
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Home sales damn well better improve. I have a relative who is listing a modest home later this week in order to move to a retirement complex.
Back to the oil topic ... When $125+ oil migrates down to gas, and both natural gas and heating oil rise in parity, expect nothing but necessities to sell very much. Maybe small home that are less expensive to maintain will see higher demand. People will just hunker down.
This is the inflation that is worth creating a recession over. There is too much easy capital chasing too few hot opportunities. Time to sponge up the excess, and fast. Anyone who mistakes oil prices today for cost push inflation is an idiot or someone who finances the speculators.
I hope housing improves, but if commodity prices remain high, we can all expect a new, lower equilibrium level of sales for just about everything, including housing. It won't be a recesssion ... it will be a change to a permanent lower standard of living.
Posted by: cinefoz | Apr 22, 2008 8:01:32 AM
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