There has been quite a bit of chatter about the recent rise in new home sales. If you dig down into the numbers and prior year chart comparisons, you might be surprised to see it may not be time to go out and buy a bunch of builder stocks.
Don’t Get Excited by Jump in New Home Sales
Wall Street Journal, February 26th,
2014
New home sales jumped to the
highest level since July 2008 in January, which is really good news
if it holds. But the Census new-home sales data is a choppy indicator with a
small sample size, and when you take a longer look at the series it’s pretty
clear that the nation’s two-year-old real estate turnaround is still largely a
recovery in prices.
The building of new homes — the housing
sector’s biggest contribution to annual economic growth — continues to lag
badly. This disconnect goes a long way toward explaining why U.S. growth is
still pretty weak some four years after the recession. It’s also why
economists’ hopes that 2014 will finally be a breakout year for the economy
depend on home building regaining its footing in the spring.
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