Ridicule by media critics has apparently made some headway against the business press's annoying habit of describing bad news about the economy as having occurred "unexpectedly." Now they seem to be reserving the "U-word" for unexpected improvements, which haven't been seen very much during the past seven-plus years,
Instead, reacting to today's bad news from the National Association of Realtors, which reported that seasonally adjusted existing homes sales dropped by 7.1 percent in February, Bloomberg News said that they "dropped more than forecast." Reuters opened with "U.S. home resales fell sharply," saving specific comparisons to forecasts for a much later paragraph. The Associated Press, which rarely even recognizes the existence of such forecasts, stuck to that posture. AP and Bloomberg both deliberately ignored a red flag about the overall health of the economy the realtors' group included in its narrative. Reuters grudgingly cited worries about the economy as "potentially troubling."
The NAR's monthly releases are usually sunnyside-up, consistent with how one would expect a trade group to promote its industry — but not this time. Its chief economist rolled out the usual excuses: weather, supply problems, and affordability issues. But this time, he also cited "unease" and "anxiety" about the overall economy (bolds are mine throughout this post; links are in original):
Existing-Home Sales Fizzle in February
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, dropped 7.1 percent to a seasonally adjusted annual rate of 5.08 million in February from 5.47 million in January. Despite last month's large decline, sales are still 2.2 percent higher than a year ago.
Lawrence Yun, NAR chief economist, says existing sales disappointed in February and failed to keep pace with what had been a strong start to the year. "Sales took a considerable step back in most of the country last month, and especially in the Northeast and Midwest," he said. "The lull in contract signings in January from the large East Coast blizzard, along with the slump in the stock market, may have played a role in February's lack of closings. However, the main issue continues to be a supply and affordability problem. Finding the right property at an affordable price is burdening many potential buyers."
According to Yun, job growth continues to hum along at a robust pace, but there appears to be some uneasiness among households that the economy is losing some steam. This was evident in NAR's latest quarterly HOME survey – released earlier this month – which revealed that fewer respondents believe the economy is improving, and a smaller share of renters said that now is a good time to buy a home.
"The overall demand for buying is still solid entering the busy spring season, but home prices and rents outpacing wages and anxiety about the health of the economy are holding back a segment of would-be buyers," says Yun.
Bloomberg's Victoria Stilwell did not cite Yun's concerns about the economy, and stuck entirely with the supply issue:
Sales of previously owned U.S. homes dropped more than forecast in February after reaching the second-highest level since 2007 as low inventory levels continue to limit progress in housing.
... Sales were weaker than the most pessimistic forecast in a Bloomberg survey of economists.
Faster growth in residential real estate is being hampered by a limited selection of available properties that has led to higher offering prices. While mortgage rates are attractive, affordability remains an issue for potential first-time and lower-income buyers whose participation would help broaden the market’s improvement.
“This number seems to suggest the trend may be a little weaker than we thought,” said David Sloan, senior economist at 4cast Inc. in New York. “Supply is fairly limited, so that is a restraint on sales.”
The AP's Boak also failed to cite what the realtors said. Instead he hit the supply problem hard, and created a hokey economy-related excuse:
US HOME SALES SLUMP IN FEBRUARY; SUPPLY SHORTAGE HITS MARKET
Americans retreated from home-buying in February, reversing months of prior gains as low inventories push up prices to levels that restrict sales.
... The housing market enters the traditional spring buying season facing a quandary: There are relatively few properties listed for sale, even as steady job gains and low mortgage rates have bolstered demand from would-be buyers. The limited supplies have fueled rising prices that have, in turn, reduced affordability and limited sales levels. These cost pressures were further enhanced by a volatile stock market that hit down payment savings.
For heaven's sake, Josh. People don't have the money they're targeted for down payments on a home in the stock market — or at least the fundamentals of investing dictate that they shouldn't. Money targeted towards that goal should be in cash and short-term investments having no risk of losing principal. While on that subject, it doesn't help home affordablity that the interest rates on money invested in such instruments are rarely as high as even 1.5 percent.
Continuing with AP:
"We assume the plunge in the stock market in the first six weeks of this year persuaded some potential homebuyers to reconsider, at least temporarily," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
Shepherdson noted that sales momentum "stalled" in February, but sales volumes might pick-up in the spring.
The oft-quoted Shepherdson is making a different point, namely that the recent stock market plunge — since recovered, thanks to Federal Reserve Chairman Janet Yellen keeping interest rates artifically low yet again (it's amazing how this supposedly okay economy is so fragile it can't handle even another quarter-point rate increase) — shook Americans' overall confidence. It certainly did not have a direct impact on wise savers' down-payment funds.
As noted earlier, Reuters at least cited the economy as an issue weighing on homebuyers. But reporter Jason Lange told readers that today's news was a one-off, and that, darn it, the economy is just fine:
U.S. existing home sales tumble in warning sign for housing market
U.S. home resales fell sharply in February in a potentially troubling sign for America's economy which has otherwise looked resilient to the global economic slowdown.
... The housing report runs counter to data showing strong job growth and a stabilization of factory output, which had taken a hit from weaker demand overseas and a strong U.S. dollar.
Housing continues to be supported by a tightening labor market, which is starting to push up wage growth, boosting household formation. But a relative dearth of properties available for sale remains a challenge.
Lange's grip on reality is weak:
- Factory output as surveyed by the Institute for Supply Management has been in contraction for five straight months. The only "stabilization" is at a level of slight contraction. While manufacturing showed a small gain in February, overall industrial production as reported by the Federal Reserve fell by 0.5 percent.
- The labor market is not tightening. The labor force participation rate is unacceptably low, the unemployment rate appears not credible to those who conduct the surveys which produce the related report, and the evidence of "wage growth" sufficiently above inflation to make a genuine difference is scant to non-existent.
- Wage growth didn't occur in February. The average hourly pay rate fell by 3 cents per hour. Thanks to a shorter average work week, average weekly earnings fell by over $6, the worst performance in the history of such recordkeeping.
All in all, the coverage of today's troubling decline in existing home sales was weak — but not "unexpectedly" so.
Cross-posted at BizzyBlog.com.
