Notions of Housing Recovery Only Seem Relative To Price (XHB)

The Commerce Department data for April’s new home sales looks good on the surface, but there are perhaps more problems than there are winners here.  On an annualized basis, there were 352,000 new homes sold, a 0.3% gain.  Technically, this is growth, but it is also under the 365,000 consensus estimate.  There was also a revision to the March data down to 351,000, which means that the -0.6% originally reported was really a -3.0% reading.

To show how bad this is, the SPDR S&P Homebuilders (NYSE: XHB) ETF is down almost 5% to $11.46 after the data.

Pent-up demand may be much smaller than many of the ‘greenshoots’ crowd is hoping would be there.  To show how poor this is, new home sales are actually off by almost 34% from April 2008.

Median home prices are down almost 15% from last year to $209,700.00 for new homes.  The average price came down even more by 19% from a year ago to $254,000.00.

With foreclosures back in swing and with banks now warming up to unloading their bad loan inventories it seems that new strength is more likely to be price-based and affordability-based rather than due to organic demand.

This term greenshoots is also changing the way data is being interpreted.  As far as anything really good, all we are still seeing is a “less-bad” series of numbers where we see compressions in the rate of decline.  The “positive numbers” and gains in numbers we are seeing are from such low levels that it is as exciting as celebrating a birthday at a dollar store.

This housing recovery is so far acting like a nearly-false recovery.  It is still just less and less dismal.

JON C. OGG
May 28, 2009