New US Home Sales up again in July

August 28, 2009
Matt Isleib

 

In July of 2009 U.S. new home sales increased 9.6 percent. Take note that this figure is for new construction and not existing home sales. That is a big jump and certainly something that we have not seen in a while. On the surface things look good, great in fact. Home builder sentiment is improving, consumer confidence is rising, the stock market seems like it is back to its never ending upward incline and last but not least the recent CARS program was a huge success, in fact it helped push over 700,00 cars being sold during the program. Even Fed Chairman Ben Bernanke is making comments that the worst is behind us.

While I think it is fairly obvious that the worst is behind us we are far from calling it a recovery. Let’s look at what the “worse” part of that statement was. In one weekend we saw the Fed orchestrate the sale of the collapsed Bear Sterns, the fall of a 100 year old Investment Bank in Lehman Brothers. We literally witnessed the credit markets seize. Washington Mutual collapsed, AIG bilked the tax payer out of billions and not just a couple billion over 100 billion in bailouts. The Government has spent trillions to prop up the financial system in the past year. So to say the worst is behind us is indeed true, to say we may we may be in recovery is extremely premature.

The issues still at hand are some big mountains in the way of the road to recovery. First the job market is still weak so no improvement in the job arena means no chance anytime soon of recovery. The deficit has surpassed $10 trillion, the FDIC is near broke and the bright spots that we have seen in the real estate and economy is all smoke and mirrors.

An uptick in existing or new home sales recently is due mainly in fact that the 1^st time home buyer tax credit is due to expire within the next several months. The 700,000 cars that were sold are artificial sales propped up by the government spending billions to entice the sales, the stock market is way overbought, foreclosures are still on the rise and mortgage rates are still north of 5 percent.

So where does that all leave us? We have seen the worst but the road ahead is a long one indeed any thought of recovery being here is foolish. Maybe summer 2010.