Economy Watch: New Home Sales Take a Dip in May
New home sales dropped 2.1 percent in May; the United States is tapping emergency stockpiles of crude oil and selling it on the open market; and the congressional impasse over the debt ceiling returns.
By Dees Stribling, Contributing Editor
New home sales dropped 2.1 percent in May compared with April, according to the U.S. Census Bureau on Thursday, which was a drop, but not as much of a drop as economists had expected. The annualized rate of new home sales for the month was 319,000, compared with an upwardly revised 326,000 in April.
Another bit of data released by the Census Bureau might, however, bode better for the long-term housing recovery, which is very likely the only kind of recovery the market is going to experience. Namely, that the supply of new housing product was at 6.2 months, mainly because homebuyers aren’t building very many houses–why would they? But 6.2 months’ worth of inventory also happens to be a record low for the entire time that the government has concerned itself with keeping track of new home sales, which started during the Kennedy administration.
Also, the median price of a new home was $222,600, up 2.6 percent. Eventually, simple population growth is going to spark some demand for new houses, especially considering their relative affordability, though anytime soon seems unlikely.
Strategic oil reserves tapped
The United States and a number of other industrialized countries announced on Thursday that they were tapping emergency stockpiles of crude oil and selling it on the open market over the next 30 days. A total of 60 million barrels of crude will thus be released–more of a psychological gesture than a glutting of the market, since the United States itself uses about 18.7 million barrels of oil every day, while the European Union uses 13.6 million barrels, according to 2009 estimates by the CIA.
Then again, psychological gestures seem to mean as much to the international oil market as the raw numbers of supply and demand. After all, the latest spike in crude prices began with the disruptions in the supply from Libya due to its civil war, even though Libyan production accounts for only a small fraction of world production–1.6 million to 1.7 million barrels a day, according to the International Energy Agency.
For the moment, anyway, the move seems to be having some effect. The price of crude in New York dropped $4.39 a barrel on Thursday to $91.02 a barrel, its lowest level since mid-February, just before the fighting in Libya and the tsunami in Japan.
The return of debt-ceiling chicken
After a week or so of behind-the-scenes negotiations in Washington whose progress was impossible for outsiders to judge, the game of chicken seems to have returned to the impasse over the federal budget debt ceiling. The top Republicans attending Vice President Joe Biden’s talks have left for now, declaring very publicly that they are against higher taxes for anybody for any reason.
Or maybe they were tired of negotiations under the oversight of a mere vice president, and wanted the president to get involved. In any case, there are roughly six weeks to go before entering the uncharted territory of U.S. government default.
It was a wild day on Wall Street, with the Dow Jones Industrial Average finishing down 59.67 points, or 0.49 percent, though the index was briefly down more than 230 points. The S&P 500 lost 0.28 percent, but the Nasdaq was up 0.66 percent.