We like Gluskin-Sheff
economist David Rosenberg -- because what he says not only makes sense, but is rooted in an understanding of real market dynamics. This morning, Rosenberg came out firing on housing, echoing much of the commentary we've been publishing here at HW since March of this year. Here's what we had to say:?
"The U.S. housing sector is clearly double-dipping — that dive to 3.83 million units in July undercut the “depression” low of January 2009 by 15%! The lesson for the government is that their ‘tax goodies’ do nothing more than distort the market rather than actually help out. Oh yes, we should add this too; the “bulls” were all over the fact that home prices in yesterday’s existing sales report did not decline and that should be construed as a sign that real estate valuation has bottomed out. Not so fast. The fact that existing homeowners were stubborn and refused to discount was one of the reasons why sales slid a record amount in July, but reality will eventually set in that to move the near-record inventory, it will be the asking price that inevitably approaches the bid, not the other way around.
So let’s get this straight. Mortgage rates have tumbled nearly 100 basis points in the past year to a record low of 4.42% for the 30-year rate, yet existing home sales collapse a record 27% MoM to an all time low (data only back to 1999 for total sales) of 3.83 million units at an annual rate? Are you kidding me?
Not only that, but the government has implemented no fewer than eight programs to put a floor under the housing market. We suppose that someone in Washington could always argue that things would be much worse without all these incursions, but when is enough going to be enough? Let the housing market find its own equilibrium. Stop wasting taxpayers’ money on trying to influence what structure people would like to live in — there’s nothing wrong with renting and saving up for the down-payment (a word that has found its way back into the housing lexicon in the U.S.). Focus on the real crisis: job creation, or the lack thereof. It is absolutely a secular bear market when the government can expend so many resources to one sector and generate so little in the way of results.
Home listings actually rose 2.5% MoM in July so with sales sagging at a record rate, the inventory backlog surged to 12.5 months’ supply from 8.9 months in June and 8.3 months in May (and 7.8 months at the turn of the year). That is a record but there is only a limited history since the data include condos where the inventory backlog has soared to an all-time high of 16.5 months’ supply from 10.7 in June. For single-family housing, housing inventory skyrocketed to a 27-year high of 11.9 months’ supply, breaking above the prior 2008 peak of 11 months. Unless the laws of supply and demand have been repealed as they pertain to the residential real estate market, one would have to be of the view that more house price deflation is coming our way."