Not Housing Recovery, But Housing Inflation

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The Census Bureau reported a decline in month to month seasonally adjusted new house sales two days ago, but a solid increase on an annual basis. It was a confusing report, but the bottom line is that new house prices are inflating, but sales are still dead in the water relative to historical norms.

Sales of new single-family houses in February 2013 were at a seasonally adjusted annual rate of 411,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.6 percent (±20.4%)* below the revised January rate of 431,000, but is 12.3 percent (±23.3%)* above the February 2012 estimate of 366,000.

The median sales price of new houses sold in February 2013 was $246,800; the average sales price was $313,700. The seasonally adjusted estimate of new houses for sale at the end of February was 152,000. This represents a supply of 4.4 months at the current sales rate.


Econoquack forecasters' consensus expectation was 426,000 according to That was one of the rare occasions lately where they missed on the high side.

The headlines were based, as always, on seasonally adjusted data. The not seasonally adjusted data showed monthly sales of 33,000 units and a year to year gain of 10.6% for February, which was a slowdown from the 30.4% 12 month gain in February 2012. Sales have risen from 22,000 units in February 2011. Look at the trend on this chart. Awesome!

New House Sales - Recent

Bernanke has been touting the housing recovery as evidence that QE is working. To give you a better idea of just how fabulous this mammoth recovery is, here's a long term perspective. Fabulous, it isn't.

New House Sales

The range of 20,000 to 40,000 unit sales per month since 2009 compares with a range of 80,000 to 130,000 per month in the early to mid 2000's. This is what $100 billion a month of quantitative easing buys?

Looking at single family housing starts versus new house sales, the pattern is similar. Starts are up from 26,600 units in February 2011 to 41,600 units in February 2013, a whopping gain of 57%. But the numbers today are only 30% to 50% of the levels of 2000-2005. 2005 was when the housing bubble was at its peak and getting ready to drive the economy off the cliff, but current levels are still only half what they were in the recession years of 2001 and 2002. In other words, we are still in a housing production depression.

Housing Starts and New House Sales- Click to enlarge

The charts make it plain that while housing is no longer a drag on the economy, its net positive contribution to economic growth isn't much. The Fed may claim credit for the recovery, but it hasn't gotten much bang for the trillions it has printed since 2008.

The recovery in activity in existing home sales has been more robust. Volume is now down just 16% from the peak level reached in the bubble in 2005. Most existing house price measures are up about 10% from the low reached in 2011.

Home Prices- Click to enlarge

Average new house prices are up 21% since the 2009 low, and 14% in the past 12 months. Median new house prices have risen 17.7% since 2009 and 2.9% in the past 12 months after a 9% gain in the previous 12 months.

New Home Sales Prices - Click to enlarge

What we have here ladies and gentlemen is not so much a housing recovery as a housing inflation. That's what a couple of trillion in Fed quantitative easing buys us.

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Source: Wall Street Examiner

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