March was going to be the month when new home sales in the U.S. would finally break out after several months of horrible weather. After all, everyone knew that this winter's snow, ice, and low temperatures were the only things holding the new home market back. Consensus predictions ahead of today's related report from the Census Bureau were in the range of 450,000 to 455,000 annualized sales.
Oops. New home sales dove to a seasonally adjusted annualized 384,000, a 14.5 percent decline from February, a slightly larger miss compared to expectations, and a whopping 13.3 percent lower than March 2013. Press reports on this result predictably brought on appearances of the U-word ("unexpectedly"), with at least one interesting twist.
Some members of the business press are apparently sensitive to the ridicule their overuse of the U-word has caused.
As seen in the Google result below, a report at Businessweek shortly after the Census Bureau's 10 a.m. release contained that dreaded word:
But clicking on the listing's link now takes readers to a more recent report by Lorraine Woellert where the U-word is replaced by "surprising." Woellert has also pointed to an important factor in today's dreadful number:
Housing Rebound in U.S. Losing Steam as Prices Rise: Economy
The housing recovery in the U.S. is running out of steam as buyers balk at record prices and higher mortgage rates that are making properties less affordable.
Sales dropped a surprising 14.5 percent to a 384,000 annualized pace, lower than any forecast of economists surveyed by Bloomberg and the weakest since July, Commerce Department data showed today in Washington. Three of the four regions saw setbacks, with demand in the West slumping to the lowest level in more than two years.
More expensive properties, borrowing costs that have jumped almost a percentage point from last year and lenders unwilling to go out on a limb are challenging an industry still emerging from its worst slump since the Great Depression. In time, the slowly mending job market will help revive demand at builders such as NVR Inc.
Geez, Lorraine. Over four years of a "slowly mending job market" (since February 2010) haven't really revived the market. Why will continued slow mending bring about a better result? We're three months into full calendar Year 5 of this alleged economic recovery, and actual new home sales in what was supposed to be a breakout month are back to where they were in 2010:
"Record prices"? Well, yes, and it was good that Woellert pointed that out. March's median selling price came in at $290,000, which is the highest on record, and here's why:
More higher-priced properties are selling while first-time buyers and lower-income Americans struggle to get into the market. The decrease in sales was concentrated in houses priced less than $300,000, while more expensive dwellings showed gains, today’s report showed.
“The first-time homebuyer is not participating, nor are other buyers of modest means,” said David Crowe, chief economist for the National Association of Homebuilders in Washington. “We’ve lost a segment of our homebuyers because of tight credit.”
It isn't just "tight credit," Mr. Crowe. First-time buyers and other of modest means don't have the money to buy a home, partially because of slightly higher interest rates, but primarily because their incomes seriously declined since the recession and have barely budged since. Meanwhile the top half of earners in this economy are faring relatively well, driving up prices in the luxury sector.
If this were happening during a Republican or conservative administration, the business press's "rich are getting richer" chorus blaming the president's policies for the situation would be deafening. Instead, the press continues to allow President Obama and his administration to act as if they're complete bystanders as this phenomenon continues. They're not.
They're the ones who continue to run the annual deficits which have all but forced the Fed to keep it quantitative easing going (who's going to buy our bonds if the Fed doesn't create the money out of thin air to do it?). They're the ones who have decided that driving the stock market to artificial heights and making the rich richer while strangling the economy with regulations and hostile regulators is the way to run the economy. They're the ones whose housing-related regulations have turned buying a new or existing home into a bureaucratic nightmare; just ask almost anyone who has tried. They're the one who pushed Dodd-Frank, which has lenders looking over their shoulders in fear every time they even try to think outside of the box to help homebuyers qualify.
Zero Hedge noted the seriously bifurcated housing market yesterday, and has also separately pointed out that much of the improvement in new home sales during the past several years came from cash investors who are now showing signs of heading towards the exits.
At Reuters, Lucia Mutikani opened by writing that today's news was "dashing hopes for a quick turnaround for a sector that fell into a soft patch last summer."
Her story's headline was probably and unfortunately a more accurate assessment: "U.S. new home sales hint at prolonged housing weakness."