The media reported a 16% rise in new home sales in January to the highest level in 4 1/2 years based on data from the Commerce Department released today. The headlines were based, as always, on seasonally adjusted data. The not seasonally adjusted data was also rocking, showing a year to year gain of 34.7% for January, and a gain of 47.6% since January 2011, which was near the bottom in new house sales. Sales have risen from 21,000 units in January 2011 to 31,000 units in January 2013. Look at the trend on this chart. Awesome!
Here’s how Dow Jones’s Marketwatch put it.
Sales of newly constructed U.S. housing jumped almost 16% in January — hitting the highest level in 4½ years — offering strong proof that the sector’s rebound trend is intact.
Sales of new homes rose to an annual rate of 437,000 last month from an upwardly revised 378,000 in December, marking the biggest one-month gain since 1993, the Commerce Department said Tuesday. The figures are seasonally adjusted.
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The pace of sales easily blew by the 384,000 consensus estimate of the economists polled by MarketWatch.
I skimmed through the lead-ins for this story in Google News, and trust me, this wasn’t even close to being the most ebullient.
So to give you a better idea of just how fabulous this mammoth recovery is, here’s a long term perspective. It looks fabulous, doesn’t it.
Wait a minute! That 48% gain looks a little different from this angle. 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. Could Bernanke be exaggerating just a little when he claims credit for a housing recovery?
Looking at single family housing starts versus new house sales, the pattern is similar. Starts are up from 26,600 units in January 2011 to 39,600 units in January 2013, a whopping gain of 49%. But the numbers today are only 30% to 50% of the levels of 2000-2005. Of course 2005 was when the housing bubble was 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.
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. What the Fed has gotten is a return to house price inflation (another story), but it hasn’t really gotten a recovery.
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