Today’s existing home sales report was so horrendous it even shocked yours truly as I pondered the extent of the sales collapse and its implications for the organic trends in housing.
Taken together with the complete wipeout of the 2009 low new home sales pace earlier this year, the recent significant pullback in homebuilder sentiment, the clear trend-down to new home permits and starts, a subtle weakening trend for prices and a very pessimistic change in sentiment from an industry leader with advanced views of the trends in pricing, I’d say it’s safe to assume the double-dip for housing is here.
Further, a double-dip for housing will undoubtedly pose a serious challenge to the current weakening economic “recovery” likely driving it into a full-fledged downturn and most probably a second leg of contraction.
With sales collapsing for several consecutive months for both new and existing homes, it’s clear that the underlying “organic” trend for home purchases is weak which combined with rising inventory, a recently estimated 7.3 million “shadow” units (far more than a whole year's supply at the current sales pace) and rising foreclosure activity, will likely lead to another bout of falling prices forcing more “homeowners” under water and further impacting overall consumption.
The ruse of government sponsorship of the nation’s housing markets and its “stabilizing” effects is quickly showing itself to be simply failed policy and with this realization we will have to accept the truly debilitated state of our housing markets however severe.
If we are smart, we will finally embrace the notion of unfettered market clearing and reject government intervention in a process that is clearly out of the control of the whims of Washington Bureaucrats, Keynesian do-gooders and interested industry groups.
The housing double-dip and real “organic” trends are back and with them come a major dose of reality.
Disclosure: No positions