The debt crisis could transform into a currency crisis. That would create a surge in demand for gold. The source of new metal is junior mining companies. - Morris Hubbert, Precious Metals Market Analyst, Trading Risk SpecialistNew home sales for October were released today at 368k "seaonally annualized" contracts for new homes. This number missed badly vs. the expected 387k. Worse, the previous month's report - September - had a huge downard revision to 369k from the originally reported 389k. Please note that these are "seasonally adjusted annualized" numbers and not true new home sales. Here's the Census Bureau report: LINK
In fact, the actual number of new homes "sold" was 29,000. I say "sold" becuase the Census Bureau counts a "sale" when the contract is signed, regardless of whether or not financing is in place. Of that number, 9,000 were not yet started, 10,000 were under construction and 10,000 were finished but not necessarily delivered. From my last post on this, the cancellation rate of new home contracts was, in general, in the low 20% range. Based on subsequent homebuilder quarterly reports, the cancellation rate is closer to 30%, with Beazer reporting a 31% cancellation rate. This means that OF THE 29,000 CONTRACTS SIGNED, it is highly probable that only 20,000 will actually close and be delivered. If you annualize this number straight up, you get 240,000 actual homes sales.
A straight up annualization is probably not a bad guestimate as October is a "tween'er" month - i.e. in between the seasonally strong period and the dead period. At most maybe you could say that the statistically adjusted annualized run is 260,000. This is 28% below what is being reported. If you are keeping track, you'll note that new homes as counted by the Government (368k for Oct) are starting to decline again. It is highly likely, for several reasons to be discussed in a more comprehensive post on housing, that the "recovery bounce" in housing has run its course and we will see the resumption of the bear market in housing.
Folks, the housing bear has only lasted for 5 years at this point. The Government and Fed combined have dumped several trillion of "stimulus" in various forms into the housing market and they can't even stimulate the annual home sales number up to the its level going all the way back to 1963 (560k), when they started compiling the data: LINK Bear markets typically last a lot longer than 5 years and require a long time to wring out the excesses, fraud and corruption that created the preceeding mania.
Just for the record, I am not cheering for another housing decline. But I am dancing on the grave of everyone who participated in the massive fraud and Government/Fed intervention which spawned the housing bubble to begin with (Clinton, Robert Rubin, Alan Greenspan, Bush, Congress etc). A fraudulent, corruption-riddled housing finance system created the bubble, it was chased blindly by mindless individuals who made terrible, sub-prime debt fueled investment decisions and it fostered one of the biggest mechanisms of misallocated capital and wealth-transfer in the history of the planet (derivatives and Treasury bonds/US dollar will prove to be bigger). Unfortunately, we are now going to suffer the consequences of this and printing money is not a viable "Plan B" (see my sidebar at the top).