New Home Sales Tank in December – It’s The Demand, Stupid!

New Home Sales Worse Than Usual For December

New home sales in the US in December were an unqualified disaster. The headline number came in at a seasonally adjusted rate of 414,000 for the month, missing the consensus estimate of 457,000 by a mile. Miracle of miracles, the headline seasonally adjusted number accurately conveyed the reality for a change. Actual, not seasonally adjusted (NSA) sales in December totaled 28,000, a drop of 4,000 (-12.5%) from November and unchanged from December 2012. The month to month drop was much worse than is typical for December. This may be one of those rare instances where it is legitimate to blame the weather. If that’s the case, the numbers will snap back with the Spring thaw. January is likely to be another month in the deep freeze.

New Home Sales No Boost for US Recovery

The mainstream media and government functionaries have been happy to proclaim a housing recovery that is contributing to economic growth. Yes, there’s been growth. A year ago the annual growth rate hit an astounding 30%. But from what? That gain came from such a low level that it was barely noticeable in the big picture. New home sales today remain only slightly above the record lows set in 2008. Monthly sales have been in the 25,000-45,000 range over the past year. Compare that with 2005 when they were in the 85,000 to 125,000 range. Of course, back then, the housing bubble was the economy.

Weak New Home Sales Result From Weak Demand, Not Tight Lending Standards

Low level Obama mob mouthpieces, like economic court jester apparatchik Mark Zandi, like to blame overly tight mortgage lending standards for the slow sales. Mortgage broker Logan Mohtashami, who is actually in the trenches with real buyers doing real deals with real lenders in California has thoroughly debunked Zandi and his ilk. The problem is not tight lending standards. It’s the demand, Stupid!

There are still 5 million fewer people with full time jobs today than in December 2007. The number of full time jobs is now only 6% greater than in December 2009 but new home sales are 17% higher than they were in December 2009. Even with the weather as a potential depressant last month, the gain in home sales since the bottom of the crash is proportionally substantially greater than the gain in full time jobs over the same time span. Furthermore, considering that most of the new jobs created since 2009 have been low pay service jobs, it is abundantly clear that the weakness in home sales is about demand, not “too tight” lending standards.

New Home Sales and Jobs- Click to enlarge

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