Wednesday, May 23, 2012

New Home Sales: L-Shaped Not V-Shaped

The Lehmann Letter (SM)
All past housing recoveries have been V-shaped not L-shaped. The current recovery is L-shaped rather than V-shaped. That's because the Fed contributed to past downturns by raising rates and sparked recoveries by reducing rates. This time we had an asset-bubble that popped and the Fed can't stimulate expansion by lowering rates.

Yesterday's letter pointed out that optimism accompanying April's increase in existing-home sales should be tempered by placing recent data in historical context. That context shows how weak existing-home sales are compared to past performance and how anemic this recovery remains when compared to past recoveries from recession.

New Home Sales

(Click on chart to enlarge)

(Recessions shaded)

Today's Census Bureau report on April new-home sales strengthens that observation:

The report says:

“Sales of new single-family houses in April 2012 were at a seasonally adjusted annual rate of 343,000. This is 3.3 percent (+/- 12.3%)* above the revised March 2012 estimate of 332,000.”

Sales continue to bump along the bottom with no V in sight.

(To be fully informed visit

© 2012 Michael B. Lehmann

No comments: