Economy Watch: New Homes Sales Cruise Along Bottom
- Sep 27, 2011
New home sales dropped 2.3 percent from July to August to an annualized rate of 295,000 units, according to the U.S. Census Bureau on Monday. That’s still above the annualized rate of August 2010—which was 278,000 units, so far the absolute nadir of the modern housing industry—but no one calls the current trend a recovery or even a hint of recovery (or even a suggestion of a hint of a recovery).
The median price for a new home (half sell for more, half for less) also dropped month-over-month in August to $209,000, according to the government. The median hasn’t been that low since October 2010.
“As builders in our recent surveys have been telling us, the lull in new-home sales continued even as mortgage rates held at extremely favorable levels in August,” David Crowe, chief economist at the National Association of Home Builders, noted in a statement. “This is partly because continuing tight credit conditions are dissuading even well-qualified buyers, who are having trouble obtaining the good rates that are out there.”
Chicago Fed National Activity Index slacks off
The Chicago Fed’s National Activity Index dropped to -0.43 in August from +0.02 in July, led by declines in production- and employment-related indicators, according to the Federal Reserve Bank of Chicago on Monday. Three of the four broad categories of economic activity that the index reflects dropped month-over-month.
Since a zero value for the index means that the national economy is growing at its historical trend rate of growth, August put the U.S. economy below trend, or below-average growth. Production-related indicators, though down for the month, were still roughly at historic trend (+0.01), while employment-related indicators dropped below trend to -0.08 in August. Consumption- and housing-related indicators have long been below trend, and August was no exception (-0.35, compared with -0.33 in July).
The index’s three-month average, known by the ungainly, economist-friendly name of CFNAI-MA3, downticked to -0.28 in August from 0.27 in July. The CFNAI-MA3 for the last 15 years or so is instructive in that in describes the ups and downs of the economic quite precisely. From 1996 to 2001, the index trended well above average, dipping significantly for the 2001 to 2002 recession, but regaining an above average pattern until 2007—during the housing bubble, in other words. During the darkest days after the Panic of 2008, the CFNAI-MA3 touched -4, a number no one ever hopes to see again. In 2010 and again this year, growth was briefly above average, but it hasn’t been sustained.
Wall Street swings up
Wall Street, perhaps feeling optimistic about the prospects for the European debt not blowing up, ended decidedly in the positive column on Monday (but wait a week and investors will become nervous again about European debt blowing up). The Dow Jones Industrial Average spiked 272.38 points, or 2.53 percent, while the S&P 500 gained 2.33 percent and the Nasdaq advanced 1.35 percent.
Outside, near the literal Wall Street in Lower Manhattan, a protest called Occupy Wall Street inspired the arrests over the weekend of about 80 protesters who were “impeding traffic.” The main effect of the arrests seems to have been to attract attention to the protesters, including at least one celebrity drop-in. No more protesters were arrested on Monday.
Protesters have been occupying Zuccotti Park near Wall Street since Sept. 17, vocally objecting to government bailouts, wealth inequality, corporate greed and the like, as protesters have before. This time around, however, online activism is playing a major part, using social media as organizing tools, taking things in unpredictable directions.