Wednesday, May 30, 2012

April New Home Sales: The Hype vs. The Reality

Check out some of the headlines a few day ago following new home sales reports.

Detroit Free Press: April new-home sales increase 3.3%, pointing to recovery

"Americans bought more new homes last month, the latest evidence that the U.S. housing market could be starting to recover."

Fox Business News: US New-Home Sales Up 3.3% In April; Prices Rise In March

"Sales of newly built homes in the U.S. grew faster than expected in April and home prices posted a solid gain the prior month, adding to the increasing momentum for the long-struggling sector."

New York Times: New-Home Sales Climbed in April, Building Optimism

"The spring home-selling season got off to a strong start in April, the Commerce Department said Wednesday, with rising sales and prices providing evidence that a housing market recovery was gaining some traction."

San Francisco Chronicle: New-home sales rise in April

"Americans bought more new homes last month, the latest evidence that the U.S. housing market could be starting to recover."

The Hype vs. The Reality

After all that hype, let's take a look at the reality. To eliminate seasonal fluctuations, the best comparison is the current month vs. the same month in previous years.

Here is a chart from reader Tim Wallace that shows what I mean.



click on chart for sharper image

Being the ever-optimist, I happen to believe that home sales are in a bottoming process. However, a bottoming process and a "recovery" are not the same thing. A claim that a recovery is underway needs to be backed up with facts, not hype.

There is little evidence of a recovery.

We have heard similar recovery stories (all false), dozens if not hundreds of times. All were based on wishful thinking, gimmicks, temporary fluctuations, and shoddy reporting similar to what you see above.

Supposedly the "recovery gains traction". Pray tell what "recovery" is that?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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