Pending home sales dove 3.7%, well below the Bloomberg Econoday consensus estimate of -1%, and even below the bottom estimate of -2.4%
The bad details continue, as last month’s huge rise of 5.1% was lowered to 3.9%.
Highlights
Existing home sales have been trending higher but today’s pending home sales index, which tracks contract signings, may be pointing to slowing for the early part of the summer. The index fell a steep 3.7 percent in the May report to nearly reverse a downward revised 3.9 percent jump in April. Year-on-year, the pending sales index is down 0.2 percent which hints at moderation for the 4.5 percent rate of final sales. Details data show monthly declines across all four regions with year-on-year rates all flat near zero. Housing data have been up and down this year but behind the noise have been deceptively solid rates of growth, among the strongest rates of the nation’s slow-growth economy.
Pending Home Sales
GDP Will Follow
Does anyone see the trend Bloomberg mentions? I don’t.
Since pending sales are a leading indicator of reported sales as well as household maintenance like painting, furniture, carpeting, etc. Behind the noise, this is going to impact GDP, perhaps significantly.
Mike “Mish” Shedlock
This is the first year over year decline in pending home sales since August 2014, and then only by -0.2%. 18 out of 19 YOY increases seems kind of like a trend.
2015 was “Lucy with the football” too
“Does anyone see the trend Bloomberg mentions? I don’t.”
Bloomberg pathetic … or, maybe they just didn’t want to draw the ire of POTUS for “peddling fiction”?
Seriously, any strength of home sales earlier this year was courtesy of Federal Reserve’s “Lucy with the football” interest rate policy.
Following the December hike, all the “experts” were breathless in opinion of 2 to 4 hikes this year. Fencesitters piled in why the getting good. Now that people realize the FR won’t raise rates for a long long time (heck, maybe wait for NIRP) the trend will be down.
There is a big pent up demand for housing. The homeownership rate is at a 50 year low. (I know you like links https://fred.stlouisfed.org/series/RHORUSQ156N). Housing will continue to pick up from the current still very depressed level.
Unless of course Trump becomes president, then the global depression will impact all industries.
Credit worthy demand?
I think much of the demand for housing has been investor related … pushing prices out of reach for the typical household facing declining income.
With property taxes, HOAs, maintenance, insurance, etc many households better off renting.
If this report was reflected in the GDPNow from today, any weakness in housing was offset by strength in consumer spending as GDPNow bumped up from 2.6% to 2.7%.
Looks like yet another reason to ridicule the neo-keynesians who think every problem can be solved with lower interest rates (aka stealing from savers) and endless increases in debt (aka stealing from future generations.
The Fed needs to normalize interest rates. Yes it will be painful to the politicial kleptocrats. Yes, it will encourage middle class people to save more / spend less. Of course there will be a painful adjustment in the short term.
But only a moron thinks lower interest rates and endless debt will have a different outcome in Europe or the USA than it did in Japan
Looks like yet another reason to ridicule the neo-keynesians who think every problem can be solved with lower interest rates (aka stealing from savers) and endless increases in debt (aka stealing from future generations.
The Fed needs to normalize interest rates. Yes it will be painful to the politicial kleptocrats. Yes, it will encourage middle class people to save more / spend less. Of course there will be a painful adjustment in the short term.
But only a moron thinks lower interest rates and endless debt will have a different outcome in Europe or the USA than it did in Japan
I tried to Like each of the 5 comments above. WordPress first took me to a log in screen which I passed. Still no luck voting Like. With comment I log in via Face Book and then magically the system works, yet only partly. I can not fix our economy and I do not trust Hillary or Trump to do so.
Supply drops, prices rise, slowing demand. Market at work.
Not sure how supply dropped, aside from some brush fires.
In anything resembling a free market, once demand causes prices to rise, supply increases. Bringing the two into equilibrium again. Realistically, in free markets without perfect information and with any “sunk” costs and/or non instantaneous production processes, supply will overshoot demand, in a variation of the winners curse “problem.”
In “markets” managed for the benefit of banksters and other connecteds, zoning and other laws/lawyer welfare, are there to prevent that from happening, of course. Gotta keep the banksters’ “assets” scarce, and the mere equals begging, and all…..