Housing & Retail Suggests "V" Bounce May Be Short-Lived
As can be seen in the graph below, if this recession is indeed truly over, this would be the first recovery of the last 40 years where housing starts remained below 800,000 SAAR, which if adjusted for population should actually be running well north of even that number in a typical recovery.. It seems very reasonable to conclude that this recovery may leave a lot to be desired.
As I have written here before, this downturn has not merely been a deep recession.
Econoday.com
Released on 10/20/2009 8:30:00 AM For September, 2009 PriorConsensusConsensus RangeActual Starts - Level - SAAR0.598 M0.615 M0.590 M to 0.630 M0.590 MPermits - Level - SAAR0.579 M 0.573 M Highlights
Housing starts look positive in September from August but not after taking into account a downward revision to the prior month. Housing starts in September rose 0.5 percent, following a revised 1.0 percent decline in August. The September pace of 0.590 million units annualized was down 28.2 percent year-on-year and fell short of the consensus forecast for 0.615 million units. Importantly, August was revised down from 0.598 million units to 0.587 million units annualized. The advance in September was led by the single-family component which increased 3.9 percent after dropping 4.7 percent the month before. In contrast, the single-family component fell 15.2 percent after rising 20.7 percent in August.
Related
Calculated Risk, as always, gives another excellent take on why this recovery may not at all resemble the "V" that is being so strongly signaled by traditional leading indicator indexes such as ECRI's LLI and WLI or the Conference Board's LEI, and makes no bones about how the V-sters have been confusing any housing activity with prospects for recovery.
As CR tells it:
Housing and the Economy
...Probably the best leading indicator for the economy is investment in housing1.
We can use new home sales, housing starts (usually single-family starts), or residential investment (from the BEA GDP report), as indicators of housing.
We can probably also use the NAHB builder confidence index.
Those expecting a "V-shaped" or immaculate recovery - with unemployment falling sharply in 2010 - are clearly expecting single family housing starts to rebound quickly to a rate significantly above 1 million units per year.
Not. Gonna. Happen.
There are just too many excess housing units for a rapid recovery in new home sales and single family housing starts. Yes, new home inventory has declined significantly, and existing home inventory has also decreased (although still very high). But there are also a record number of vacant rental units - with the vacancy rate approaching 11% - and the housing inventory includes these units too.
Notice what is not included as a leading indicator: existing home sales.
The sale of an existing home adds a little to the economy (some commissions and fees), and sometimes some added spending on improvements. Only the improvements add to the housing stock (not commissions). And right now marginal buyers have very little to spend on improvements (see this story).
Those looking at existing home sales for economic guidance are confusing activity with accomplishment.
Gallup: Christmas Spending Forecast Down From a Year Ago
As I have written here before, this downturn has not merely been a deep recession.
Econoday.com
Released on 10/20/2009 8:30:00 AM For September, 2009 PriorConsensusConsensus RangeActual Starts - Level - SAAR0.598 M0.615 M0.590 M to 0.630 M0.590 MPermits - Level - SAAR0.579 M 0.573 M Highlights
Housing starts look positive in September from August but not after taking into account a downward revision to the prior month. Housing starts in September rose 0.5 percent, following a revised 1.0 percent decline in August. The September pace of 0.590 million units annualized was down 28.2 percent year-on-year and fell short of the consensus forecast for 0.615 million units. Importantly, August was revised down from 0.598 million units to 0.587 million units annualized. The advance in September was led by the single-family component which increased 3.9 percent after dropping 4.7 percent the month before. In contrast, the single-family component fell 15.2 percent after rising 20.7 percent in August.
Related
Calculated Risk, as always, gives another excellent take on why this recovery may not at all resemble the "V" that is being so strongly signaled by traditional leading indicator indexes such as ECRI's LLI and WLI or the Conference Board's LEI, and makes no bones about how the V-sters have been confusing any housing activity with prospects for recovery.
As CR tells it:
Housing and the Economy
...Probably the best leading indicator for the economy is investment in housing1.
We can use new home sales, housing starts (usually single-family starts), or residential investment (from the BEA GDP report), as indicators of housing.
We can probably also use the NAHB builder confidence index.
Those expecting a "V-shaped" or immaculate recovery - with unemployment falling sharply in 2010 - are clearly expecting single family housing starts to rebound quickly to a rate significantly above 1 million units per year.
Not. Gonna. Happen.
There are just too many excess housing units for a rapid recovery in new home sales and single family housing starts. Yes, new home inventory has declined significantly, and existing home inventory has also decreased (although still very high). But there are also a record number of vacant rental units - with the vacancy rate approaching 11% - and the housing inventory includes these units too.
Notice what is not included as a leading indicator: existing home sales.
The sale of an existing home adds a little to the economy (some commissions and fees), and sometimes some added spending on improvements. Only the improvements add to the housing stock (not commissions). And right now marginal buyers have very little to spend on improvements (see this story).
Those looking at existing home sales for economic guidance are confusing activity with accomplishment.
Gallup: Christmas Spending Forecast Down From a Year Ago