Great Housing Numbers???

The government spin seems to be in full force. Most headlines you read are something along the lines of "The Commerce Dept. reported today that new home sales unexpectedly rose 2.8 percent in July, after falling 4 percent in June." The market seems to like the numbers or I should say at least relieved that they were not worse. Thing to remember in general was these were July numbers which means pre credit crunch. Either way they are hardly something to celebrate.

Inventory was 533,000 units slightly below last year which at the current sales rate is 7.5 months of supply. Of course the Census Bureau does not include cancellations and they are at record levels. Another headline number is that average sales prices were up slightly which also should be viewed very skeptically because prices do not include builder incentives and are subject to wide revisions. Also July new home sales were 74,000 down from 83,000 last year and lowest July numbers since 2000. We are on pace to only have maybe 900,000 new home sales this year and probably less.

This is an interesting chart. Look at 1979-1980.The crash in that recession went from 700K annual new home sales to 400. Now look at 2006-2007. The figures have dropped from 1400 to just over 800. Recession maker? You know time will tell. Bubbles demand bubble outcomes. We have had a bubble outcome in the debt markets. Maybe the bubble outcome demand has been met but I would guess there is another shoe to drop.

In general the housing numbers could have been worse which is why the market is up but there is plenty to be wary about before we can truly breathe easy. I am still predicting a major home builder goes bankrupt which in my mind will be the signal to start buying homebuilders.