At 10 a.m. this morning, the Census Bureau essentially declared the much-ballyhooed "housing recovery" an illusion.
Only 35,000 homes were actually sold in July. That translates to a seasonally adjusted annual rate of 394,000, miles below the expected 487,000 and 12% below June's 455,000, which was itself revised down from 497,000. After the jump, I'll reveal what supposedly leading personal finance site CNNMoney.com had posted in response to this news:
Nothing (screen cap is of top portion of page; no story was present anywhere on the entire page). I guess they were awaiting White House instructions as to how to react.
Meanwhile, at the Associated Press (as of 10:39 a.m.; saved here at host for future reference, fair use and discussion purposes), Christopher Rugaber assigned all of the blame to rising interest rates, and clung to the notion that the housing recovery is still strong (bolds are mine):
US NEW-HOME SALES PLUNGE AS MORTGAGE RATES RISE
Americans cut back sharply in July on their purchases of new homes, a sign that higher mortgage rates may weigh on the housing recovery.
The Commerce Department said Friday that U.S. sales of newly built home dropped 13.4 percent to a seasonally adjusted annual rate of 394,000. That's the lowest pace in nine months. And it is down from a rate of 455,000 in June, which was revised sharply lower from a previously reported 497,000.
New-home sales have risen 7 percent in the 12 months ending in July. The annual pace remains well below the 700,000 that is consistent with a healthy market. (44% below. -- Ed.)
... mortgage rates have risen a full percentage point since May and have started to steal some of the market's momentum. (Uh, more like all of it. -- Ed.)
... The impact of higher mortgage rates has surfaced in the new-home market faster because the July sales report reflects signed contracts. Sales of previously occupied homes reached a nearly four-year high last month. But that report measured completed sales, which typically reflects mortgage rates locked in a month or two earlier.
The jump in previously occupied home sales likely reflected a rush by home buyers to lock in lower rates. Some economists expect those sales to fall back in August.
Even so, most economists expect the housing recovery will persist. Mortgage rates remain relatively low by historical standards.
Mortgage rates are indeed still historically low, which begs the question as to why a one-point rise should hit the housing market so hard.
Answer: The economy isn't fundamentally sound.
Rugaber also "somehow" missed something Zero Hedge picked up, namely that the median new home sales price hit its lowest level in six months.
Back to sales drop: After the early-1980s recession, the housing market roared back when mortgage interest rates ranged from 12%-14%. Even after subtracting inflation, which averaged a bit less than 4% during 1983-1985 (down from 13.5% in 1980 and 10.3% in 1981), real rates were roughly twice as high then as they are now. Yet the new-home market can't handle a one-point rate jump without cratering at levels that are over 40% below "healthy" (I think the benchmark should be more like 800,000).
Rugaber's statement that "most economists expect the housing recovery will persist" isn't supportable, because he can't possibly have had to the time to get revised takes from enough economists to matter based on today's disastrous news.
Cross-posted at BizzyBlog.com.