Housing

by Larry Levin

Existing home sales plummeted last month - big time. Housing sales have been in a down trend since the government took away the freebies. Of course that government cheese did nothing but pull forward future demand - demand that would have occurred naturally without government giveaways. I knew it. You knew it. But guess who didn't know it and probably never will: economists.

You'd have to be as dumb as an economist to think that housing was getting better now and that the government handouts were anything but faux-stimulus. Said another way, you'd have to be as dumb as an economist to think that government giveaways were real economic activity. Moreover, you'd have to be as foolish as a Keynesian devotee to believe that all of the additional debt doesn't matter.

The program didn't work, yet we're saddled with the massive cost of the program...and politicians are dreaming up even more housing giveaway schemes.

Bloomberg said, Sales of U.S. previously owned homes plunged 27 percent in July, twice as much as forecast, evidence foreclosures and limited job growth are depressing the market.

Purchases plummeted to a 3.83 million annual pace, the lowest in a decade on record keeping and worse than the most pessimistic forecast of economists surveyed by Bloomberg News, figures from the National Association of Realtors showed today in Washington. Demand for single-family houses dropped to a 15- year low and the number of homes on the market swelled.

A tax credit of up to $8,000 boosted sales earlier in the year, pulling forward demand and indicating additional advances will prove difficult. Mortgage rates at record lows have provided scant relief to the industry as unemployment hovers close to 10 percent, foreclosures hold near record-highs and the economy cools.

“This is a devastating reading on the U.S. housing market,” said Derek Holt, an economist at Scotia Capital Inc. in Toronto. “There’s such an inventory overhang, it shows there will be pressure on prices” in the months ahead.

The pace of existing home sales is the slowest since comparable records began in 1999. Purchases of single-family homes dropped to a 3.37 million annual rate, the lowest since May 1995.

Range of Forecasts

Economists projected sales would fall 13 percent from June’s previously reported 5.37 million pace. The agents’ group revised the June sales figure down to 5.26 million. Estimates in the Bloomberg survey of 74 economists ranged from 3.96 million to 5.3 million. Previously owned homes make up about 90 percent of the market.

The number of previously owned homes on the market rose 2.5 percent to 3.98 million. At the current sales pace, it would take 12.5 months to sell those houses, the highest since at least 1999 and compared with 8.9 months in June. The months’ supply of single-family homes at 11.9 months was the highest since 1983, the NAR said.

The worse-than-bad news just keeps rolling in, yet the market somehow largely ignores it. This housing report came out after the market opened so it was not the reason why the Dow and S&P500 closed down today. In fact, the market closed only 1.50-points below the level where the ES was trading when the horrific housing data hit the tape. Additionally, the range after the initial drop was as ridiculously narrow as the prior few weeks individual ranges.

Regardless what the lame stream media may say, not only wasn't the devastating housing news responsible for the lower close, but it also couldn't even generate a smidgen of volatility.


Previous Day's Trading Room Results:

Trade Date: 8/24/10

E-Mini S&P Trades*
(before fees and commissions):


1) No "Secrets" trades filled today.

2) Algorithm positions (11)

3) “Reading the Tape” positions (4) combined Secret’s, Algo, & “Reading the Tape” total… -2.00



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