POOPING ON THE HOME SALES PARADE

Investors are celebrating the surprise jump in existing home sales this morning.  The National Association of Realtors said that home sales increased to a seasonally-adjusted, annualized rate of 4.74 million units.  Sales of existing homes sales rose 6.5% in December.  Those are fantastic numbers, but we’ve seen this script before.

As you can see in the chart above, existing home sales have spiked higher at the end of every year since this bubble began.  The existing home #’s are notoriously volatile so you have to take any single month with a grain of salt.

Unfortunately, this is picture perfect bubble mentality.  We are now at the portion of the decline where bargain hunters come swooping in with the hopes of turning a quick buck.  This is classic bubble psychology.  Investors and banks have come in to purchase what appear to be bargains.  In the end, this actually increases inventory and prolongs the problems.  These bargain hunters will likely be sellers in the coming years….

Further adding to the housing woes are the mounting job losses.  Fortunately, the stock market will overlook job losses as the cost cuts begin to filter down to the bottom line and corporations begin to outperform their estimates, however, this is devastating news for housing.  Jobs are the single most important component in a healthy housing market.  And the news this morning was nothing but ugly.  Job cuts today:

Caterpillar 20,000
Sprint 8,000
ING 7,000
Philips 6,000
Corus 3,500
Wolseley 7,500
Home Depot 7,000
Pfizer 13,000

While I am beginning to see signs of recovery in the broader stock market I still firmly believe a housing bottom is many years out.