Looking back at July’s results (released throughout August) it’s obvious that the nation’s housing markets are continuing to show significant weakness, even during what, for most measures, is generally the seasonal peak in activity for the year.
Slowing demand and the now undeniable mortgage-credit-financial crisis are continuing to weigh heavily on housing, setting up for what seems fairly certain to be a new leg down and ultimately a severe housing recession.
The preliminary GDP report for Q2 2007 continued to show a significant drag coming from the decline in residential fixed investment as well as significant revisions to past GDP results better demonstrating the pronounced effects this drag has had for the last four quarters.
The following chart shows real residential and non-residential fixed investment versus overall GDP since Q1 2003 (click for larger version).
The housing weakness also continues to clearly show up in retail sales as consumer’s pullback on spending for some of the most discretionary of goods.
The National Association of Realtors (NAR) released their sixth consecutive downward revision to their annual home sales forecast for 2007 putting the current outlook far below the “rose colored” initial predictions from the start of the year.NAR Chief Economist Lawrence Yun now suggests that the demand is still out there but it’s just being “delayed”.
Homebuilder confidence continues to decline to near multi-decade lows with respondents indicating that estimates of “present” and “future” conditions as well as buyer traffic continues to slump.
The Census Department’s New Residential Construction Report which continues to indicate horrendous weakness in the nation’s housing markets and for residential construction showing substantial declines on a year-over-year basis to single family permits both nationally and across every region.
The Census Department’s New Residential Home Sales Report that, despite all the traditional media’s “unexpected increase” coverage, continues to show weakness as well as significant downward revisions to April and May’s results.
As with prior months, on a year-over-year basis sales are still declining significantly at 10.2% below the sales activity seen in July 2006.
NAR’s Existing Home Sales Report showing additional confirmation that the nation’s housing markets are continuing to experience weakness with EVERY regions showing considerable declines to sales, across every product (single family, condos), as well as continued increases to inventory and monthly supply.
The June 2007 results of the S&P/Case-Shiller Indices are continued to show weakness for the nation’s housing markets with 15 of the 20 metro areas tracked reporting significant declines.
Topping the list of decliners on a year-over-year basis was Detroit at -11.01%, Tampa at -7.70%, San Diego at -7.30%, Washington DC at -6.96%, Phoenix at -6.55, Las Vegas at -5.09%, and Miami at -4.79%.
Furthermore, comparing the last major downturn in the late 80s and early 90s to the current data may indicate that the current housing downturn is in its infancy with year-over-year declines only just having materialized in the last eleven months.
The Census Department’s Construction Spending report for June again demonstrated the significant extent to which private residential construction spending is contracting.With the weakening trend continuing, total residential construction spending fell -16.11% as compared to July 2006 while private single family construction spending declined by a grotesque -25.32%%.
Key Report Details:
- The seasonally adjusted annul rate of private residential construction spending has now dropped 23.27% from the peak set back in February 2006.
- Overall private residential construction spending dropped -16.11% as compared to July 2006.
- Single Family residential construction spending dropped 25.32% as compared to July 2006.
