The So-Called Housing Recovery Is A Mirage...

U.S. new home sales slumped badly in February ― down -16.9% month-over-month or -89% at an annual rate. While some may claim that adverse weather conditions played a role, the reality is that activity was down in every region of the country ― not only down, but to unprecedented lows, too.

How can anyone really be talking about a normal recovery when housing is still in depression?

Let’s talk about normal. What’s normal is that at this stage of the post-recession recovery, new home sales would have risen +27% from the time the expansion began ― not having sagged -37% to fresh all-time lows.

The big news was on pricing. No matter how far the builders cut production, demand continues to recede at even a faster rate. Median new home prices slid -13.9% month over month, following a -0.8% decline in January, taking them to $202,100 ― the lowest they have been since December 2003.

This may not be deflation as far as consumer prices go, but it is serious deflation on the most critical part of the household balance sheet. And sadly, more deflation is very likely on its way.

Chart and Commentary Courtesy of David Rosenberg of Gluskin Sheff