Monday, July 27, 2009

What's Really A Trend?

The hope around the economy is that we are finally coming out of a recession. One pins this on the Conference Boards Leading Economic Indicators, which is telling or giving out the signal that the recession is going to end. One such piece of evidence that the bulls are pointing to is that for three months sales of existing homes have increased. Forget that we are way off the levels that this figure used to be, but three months is definitely a trend.

Please read this excellent short blog entry:

As you can see existing home sales have fallen off a cliff, some sort of bounce was going to happen, foreclosures and short sales assuredly had had an influence, and will have more influence going forward. You may even see more sales increases, but how much of those are actual real sales? Sales where lenders aren't taking a haircut?

For the housing market to stabilize, there has got to be some sort of supply/demand equilibrium, that dynamic is out of sync, as there is still too much supply out there. Also homes are still being put on the market at absurd price points.

Another great entry is the following:

31% of sales are happening via short sales and foreclosures. Remember the banks have to take a hit when this happens.

As more foreclosures/short sales happen, new home sales are pressured.


  1. Thanks for the blog entries. The Mess that Greenspan made blog is very good.
    Keep up the good work.

  2. Check out today's entry about seasonal components within Case Schiller.