New Residential Sales
The New Residential Construction report shows another decline in new home sales.
Sales of new single‐family houses in May 2021 were at a seasonally adjusted annual rate of 769,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.
This is 5.9 percent below the revised April rate of 817,000, but is 9.2 percent above the May 2020 estimate of 704,000.
In addition to the plunge in May, the Census Bureau revised April heavily lower from 863,000 to 817,000.
Consensus Misses Badly
The Econoday consensus estimates are interesting.
New home sales fell back sharply in April but are expected to rise in May to an annual rate of 868,000 versus April's 863,000.
The already sharp decline in April to 863,000 plunged further to a much sharper 817,000.
Headed Towards Pre-Covid Levels
The pre-Covid high was 756,000 in January of 2020. The Covid surge high was one year later in January 2021 at 993,000.
In between was the Covid low of 582,000 in April of 2020.
Seriously Distorted Numbers
These numbers are all seriously distorted by seasonal adjustments.
For example, in January of 2021, the peak rebound, there were 77,000 homes sold vs the widely reported 993,000 reported.
By the time the Census Bureau seasonally adjusted and annualized January sales, 77,000 turned into a reported 993,000.
Then economists take these seriously distorted numbers and compare them to Covid panic lows and report things like sales are up 9.2% from a year ago.
The year-over-year comparisons will be seriously distorted in the other direction in January of 2022 to the alleged 993,000 figure.
The January 2020 unadjusted number was 59,000 (translated into 756,000). Should January of 2022 fall to that level we will then see a report that says year-over-year sales are down 23%.
Distorted numbers aside, the economic rebound continues to weaken. That is the key take away from recent reports.
Existing home sales are also on the verge of returning to pre-Covid levels.
The Fed has extremely cheap interest rates (-7% real rates by my calculation - new report coming up later today) yet, housing is slowing and outside of housing there is little demand for loans.
In response to a Tweet suggesting this was a good time to borrow, I took a deep dive into the actual numbers in Exploring the Idea "There's Never Been a Better Time to Borrow"
The bottom line is corporations are not borrowing. And it seem to me that if there was "never, ever a better time to borrow" as the Tweet stated, then corporations would be doing more of it.
Charts That Should Scare the Pants Off the Fed (And Probably Do)
I discussed bank lending in more detail in Charts That Should Scare the Pants Off the Fed (And Probably Do).
The Fed is desperate to stimulate lending and failed. The ECB failed as well. So has the Bank of Japan.
All that remains is stimulus and speculation. But stimulus wears off quickly as noted in Impact of Three Rounds of Stimulus on Retail Spending Dollars in Pictures
That leads us to the proper conclusion as discussed at length in Inflation Then Bubble Bust Deflation: A Video With Daniel Lacalle
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