Economic Rebalancing

The global economy is horribly out of balance, with the United States going deeper into debt each year as a result of a huge trade gap. This blog describes the process of global economic rebalancing. If you have any comments or questions about the posts here, please don't hesitate to use the comments section.

Monday, March 26, 2007

So Much for Real Estate Stabilizing

Economists from the government, the Fed and the real estate industry had been sticking to the line that housing was showing signs of stabilizing. Today's data on new home sales shoots that down. This chart shows what the trend looked like before and after todays revisions:

The new data will be revised down next month as well. Besides the fact that March will be horrendous due to the mortgage meltdown, the methodology has led to consistant downward revisions for over a year. New home Sales data makes preliminary estimates based on the amount of housing starts. As I've said many times before, the old estimations aren't working because the housing market has changed. Builders aren't waiting for an order to build like they used to. Now they have way too much land, too much construction equipment and too many employees sitting around with nothing better to do. As a result, they're still trying to race each other to build homes and get rid of them, and the number of finished homes for sale keeps rising.

Those finished new homes for sale have been sitting on the market for an average of 5.2 months - not a good thing if you are a builder with liquidity concerns.

More good commentary here:

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