It appears lately Goldman can't get enough of bashing the economy. First the Oracle of Delphi's bank debt short-selling enabling trading desk (i.e., Hatzius of Goldman Sachs for the slower readers) had some harsh words about GDP and why at some point soon he will be once again within 0.0001 bps of the actual result, even if the short squeeze inducing ploy worked out just perfectly last time, thanks, signed Goldman prop. This time around Hatzius take the entire housing space to the woodshed. Who knows, maybe it is time for readers to do what the prop desk says this time (quadruple reverse psychology: beware).
A Renewed Sag In The Housing Markets
During the spring and summer, most US housing market indicators took a sharp turn for the better, with sales, starts, and prices all rising. This led many economists, ourselves included, to raise their housing forecasts, and some to project a "traditional" housing recovery with 20%-30% annualized growth rates in real residential investment in 2010 (the upgrade to our view left it well short of a traditional recovery).
In recent months, however, the housing news has turned less encouraging. Consider the following:
1. The improvement in new home sales and housing starts has stalled. On Wednesday, the Commerce Department reported that housing starts fell 10.6% in October to 529,000 (annualized), the biggest monthly drop since January. This likely exaggerates the weakness in the housing market for two reasons: first, the drop was heavily weighted to the more volatile (and lower value-added) multifamily sector, and second, it may well have been influenced by a wait-and-see attitude among homebuilders in the face of uncertainty about the extension of the homebuyer tax credit. But even excluding the latest drop, the recent data have been noticeably sluggish recently. After a sharp upward move (at least in percentage terms!) from 479,000 in April to 590,000 in June, housing starts have at best been treading water. Moreover, the monthly homebuilders' index has been unchanged on net since July and thus paints a similar picture. Finally, new single-family home sales have also essentially stagnated around the 400,000 (annualized) mark.
2. Existing home sales continue to surge… By far the strongest housing-related indicator has been the turnover of homes. The September reports on existing home sales (i.e. sales which have closed) and pending home sales (i.e. signed contracts) from the National Association of Realtors showed big monthly increases in both measures, and year-on year growth rates of 9.2% for existing home sales and 19.8% for pending home sales. We do not yet have data for October, but anecdotal reports from regional realtors' associations points to further large gains.
