The Lehmann
Letter (SM)
Today's
announcement from the National Association of Realtors blames supply
constraints for last month's weak sales.
Supply
constraints may limit recent sales in some markets, but it is difficult to
reconcile the chart with a chronic supply-side problem. If a true, overall
supply-side problem really does exist, then new construction should recover
quickly.
Let's hope
so. If the economic recovery is like a ship trying to get underway, then
housing is the anchor that prevents it from doing so.
Take a look at
the chart. Home sales over the past five years look like an “L” not a “V.” Past
recoveries were V-shaped because homeowners and potential homeowners had the
wherewithal to get in the market as soon as interest rates fell. Now homeowners
and potential homeowners can't get in the market because their balance sheets
are compromised. Lenders want strong balance sheets and strong evidence of
credit worthiness.
Existing Home
Sales
(Click on
chart to enlarge)
(Recessions
shaded)
Today's
announcement from the National Association of Realtors (NAR) provides little
solace: Existing home sales fell from 4.6 million in April to 4.5 million in May.
The NAR’s
accompanying announcement said, in part:
“Lawrence Yun,
NAR chief economist, said inventory shortages in certain areas have been
building all year. ‘The slight pullback in monthly home sales is more likely
due to supply constraints rather than softening demand. The normal seasonal
upturn in inventory did not occur this spring,’ he said. ‘Even with the monthly
decline, home sales have moved markedly higher with 11 consecutive months of
gains over the same month a year earlier.’”
"Supply
constraints" may limit recent sales in some markets, but it is difficult
to reconcile the chart with a chronic supply-side problem. If a true, overall
supply-side problem really does exist, then new construction should recover
quickly.
We'll see.
(To be fully
informed visit http://www.beyourowneconomist.com/)
© 2012
Michael B. Lehmann
No comments:
Post a Comment