In the context of his pathetic writeup on the government's disappointing report on January new-home sales, Josh Boak at the Associated Press had the nerve to claim that "demand for housing has recovered over the course of the 6 ½-year recovery from the recession."
Wow. Who knew that the industry has made it all the way back to an acceptable level at long last? The obvious answer to that question is "nobody." Even the incomplete picture Boak drew in his dispatch contradicted his ridiculous claim.
Let's start with the raw data:
Actual new-home sales have trailed the same month of the previous year twice in the past five months. Total sales during the past five months have been 184,000, barely 2 percent higher than the 180,000 seen in the same five months in the previous year. The new-home market is now almost flat, and possibly headind towards a decline.
Boak failed to note the raw sales decline, or the comparable decline in January's seasonally adjusted annual rate to 494,000 from 521,000 in January 2015. Instead he made a vague attempt to compare January to the results for calendar year 2015:
The pace of buying new homes last month slipped below last year's sales total of 501,000, a possible sign of mounting price pressures despite low mortgage rates and job gains that have pushed the unemployment rate down to 4.9 percent.
... Last month's decrease potentially complicates the outlook for residential real estate. Rising demand for existing homes had sparked hopes that builders will ramp up construction and sales of new homes will further accelerate. The 14.5 percent increase in new-home sales last year fed into those expectations. But builders have increasingly focused on the more affluent slivers of the market, while the decline in sales listings of existing homes indicate that many Americans may have lost interest in upgrading to a new property.
I think Boak was trying to say that new-home prices are higher than most Americans can afford. What he didn't say is that an overwhelming number of people who would be considering buying a new home in a genuinely strong economy aren't doing so, and haven't been for a long, long time. It's not a matter of losing "interest," it's the fact that the interest which disappeared almost 8-9 years ago hasn't come back — except, as noted for the relatively well-off, who have generally done quite well during the Obama era, despite the President's distracting class-warfare, anti-"income inequality" rhetoric.
As seen in the raw monthly results above, almost all of last year's improvement over calendar year 2014 — 55,000 units out of the year's 61,000-unit increase — occurred during the first eight months of 2015. The last four months of 2015 were unimpressive. In January, things went in reverse.
In what has become a monthly ritual, Boak once again dragged out a bogus metric designed to create artificially low "new normal" expectations:
New-home sales still lag the historic 52-year average of 655,200. Subprime mortgages helped push up sales as high as 1.28 million in 2005, a peak that ultimately signaled a bubble that burst and pushed the economy into its worst downturn since the depression.
But demand for housing has recovered over the course of the 6 ½-year recovery from the recession.
Sales of existing homes rose 0.4 percent last month to a seasonally adjusted annual rate of 5.47 million, the National Association of Realtors said Tuesday.
Even Boak's bogus 655,200 benchmark — bogus because it's not population adjusted, and thus includes annual sales figures from over 50 years ago when the nation's population was over 40 percent lower — shows that the new-home market isn't even 60 percent of the way towards recovery. Referencing the raw data above, from a trough of 305,000 in 2011 (thanks to Obama administration policies which lengthened the recession and extended the housing slump even further), the current annual level of roughly 500,000 is only 56 percent of the way back to 655,000 (195,000 increase divided by 350,000 required increase).
As long as Boak continues to use his bogus benchmark, we'll remind readers that a proper benchmark signifying genuine now-home sales recovery is more like 800,000:
Population-adjusted average annual sales during the 45 years before the advent of the POR (Pelosi-Obama-Reid) economy in 2008 were 918,000. As I have noted before, it would be appropriate to adjust that average downward to account for changing demographics and the bubble years of the previous decade, leaving a reasonable benchmark of roughly 800,000. By that benchmark, the homebuilding industry is lesss than 40 percent of the way back to where it should be (195,000 increase from 2011 to 2015 divided by a total required increase of 495,000, i.e., 800,000 minus 305,000).
Even Boak's attempt to drag in existing-home sales fell flat:
As seen above, January's seasonally adjusted annual rate for existing-home sales came in at about where it was in 2002, which is roughly when the housing market began overheating thanks to the Community Reinvestment Act- and Fannie Mae/Freddie Mac-driven housing and mortgage lending bubbles. The trouble is that the current U.S. population is almost 12 percent greater, meaning that a genuine recovery in existing-home sales would require an annual rate of over 6 million.
Thus, Boak's contention that "demand for housing has recovered over the course of the 6 ½-year recovery from the recession" is sheer fantasy — and par for the course at the Administration's Press.
Cross-posted at BizzyBlog.com.
