Toronto-based Capital Economics, an independent macroeconomic research firm, said Tuesday that a double dip in the United States housing market is now materializing. Furthermore, the report finds that for every home currently on the market, there are two homes waiting to be sold. There are conflicting opinions on whether or not a double dip will occur, and warnings abound, but the research by Paul Dales clearly calls the beginning of a new downturn. However, the Federal Reserve Bank of Cleveland is also reporting numbers that indicate the macroeconomy still shows pockets of strength. In the Capital Economics report, titled “Double Dip Begins,” Dales argues that the rush to take advantage of the tax credit pushed new home sales up by 29% in the two months to April. But in May, new sales plunged by 33% m/m to a new record low. The pending home sales index also fell sharply, by 30% m/m in June. “The expiration of the homebuyer tax credit at the end of April has triggered a double-dip in the housing market, with new home sales falling particularly sharply in May,” he writes. “The only reason why existing home sales did not fall significantly is because they are measured at the contract closing, rather than signing stage.” New legislation signed into law at the start of July dictates that as long as a contract was signed before the end of April, homebuyers can still claim the tax credit if it is closed before the end of September. Existing sales will therefore fall more gradually. Nonetheless, the number of homes in the foreclosure pipeline increased in the first quarter. The foreclosure inventory rate rose from 4.5% to 4.6% and the delinquency rate, which measures the proportion of all borrowers that have missed at least one mortgage payment, increased from 9.5% to 10.1%. “That means the potential supply, or “shadow inventory”, rose from 7.6m homes to 7.8m,” Dales said. “That dwarfs the 3.9m homes already on the market.” Dales sourced his numbers from Bloomberg, CoreLogic, FHFA and Thomson Datastream. He also cites Case-Shiller, MBA, NAR and NAHB stats as well. According to a report on international trade by the Federal Reserve Bank of Cleveland, the nominal trade deficit unexpectedly widened in May, as an increase in imports outweighed a slightly more modest rise in exports. The $1.9bn widening, which follows a $0.3bn widening in April, brings the deficit to an 18-month high of $43.3bn. However, the report sees strength in some pockets of the economy. “While the decrease in net exports will likely lop off a few tenths off of real GDP growth in the second quarter, the sharp increase in nonpetroleum imports suggests that domestic spending is continuing to recover,” states the report. “The strengthening of the dollar has not hindered US exports yet, as exports climbed 2.4% in May.” Write to Jacob Gaffney.

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