June 23, 2010

The Home Sales Decline: Stimulus Officially and Abruptly Runs Out of Steam

Filed under: Economy,Taxes & Government — Tom @ 12:34 pm

Whoa — just in time for what was supposed to be peak selling season:

Sales of new homes collapsed in May, sinking 33 percent to the lowest level on record as potential buyers stopped shopping for homes once they could no longer receive government tax credits.

… New-home sales in May fell from April to a seasonally adjusted annual sales pace of 300,000, the government said Wednesday. That was the slowest sales pace on records dating back to 1963. And it’s the largest monthly drop on record. Sales have now sunk 78 percent from their peak in July 2005.

Analysts were startled by the depth of the sales drop.

What have these “analysts” been smoking? As Captain Ed at Hot Air pointed out today, mortgage loan applications were already down 40%. So how could a 33% drop in sales be “startling”?

Let’s recite the economic litany of truth for those who still don’t get it:

  • The administration’s only hope for a lasting housing market recovery when it took office was a genuine economic rebound.
  • The administration’s only hopes for genuine economic rebound were to rely on a combination of tax cuts; bureaucratic red-tape cutting; aggressive, fossil fuel-based energy exploration and drilling; and, more broadly, an “open for businesss” attitude from the top down.
  • Instead, this administration has attempted to do a 21st century version of what spectacularly failed in the 1930s in the U.S. and in the 1990s in Japan: woefully inefficient and ineffective government stimulus (inefficient and ineffective even if not corrupt, which it sadly has been); pumping tens of billions into failed institutions (Fannie Mae, Freddie Mac, GM, Chrysler); and temporary gimmicks like the homebuyers’ credits, Cash for Clunkers, and Cash for Appliances. On top of that, it has also conducted a we’re-above-the-law regime of intimidation and plunder against those who get in their way that Michael Barone has correctly characterized as Gangster Government.

This administration is reaping what they’ve sown and inflicting it on the American people –and it’s not just since Obama came into office, or even since the Democrats took control of Congress in January 2007.

It goes back at least to the early 1990s, when Fan and Fred began their perpetration of 15 years of systematic fraud to the tune of hundreds of billions if not trillions of dollars on the housing and mortgage-lending industries, the bond rating agencies, and the securities markets.

It compounded on itself in the late 1990s, when Fan and Fred sharply lowered credit score approval thresholds for mortgage loans it was willing to buy.

And finally, it was triggered in the late spring of 2008, when the three leading Democrats and their party officially set the POR (Pelosi-Obama-Reid) Economy into motion in the name of achieving electoral victory.

Given the lessons of history and the seeds sown in advance, it’s fair to ask if this is after the economy that has resulted from these actions is what they really want. In fact, it’s more fair to demand proof that it’s not.

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5 Comments

  1. Economists are now expecting home values to further decline until bottoming in 2011. Wow. Most of the same economists probably are on record of being in favor of Obama’s action to “do something” to save the housing market. How much more proof do we need that federal bailouts harm the economy?

    Comment by Michael — June 23, 2010 @ 2:59 pm

  2. [...] This post was mentioned on Twitter by Tom_Blumer, Daniel Arlt and Daniel Arlt, Daniel Arlt. Daniel Arlt said: BizzyBlog: Instead, this administration has attempted to do a 21st century version of what spectacularly failed in… http://bit.ly/a7wW3C [...]

    Pingback by Tweets that mention BizzyBlog -- Topsy.com — June 24, 2010 @ 12:00 am

  3. A follow up to: http://www.bizzyblog.com/2010/06/04/econ-catch-up-and-the-may-employment-situation-report-060410/

    Double-Dip Recession Fears Putting Scare Back in Market http://finance.yahoo.com/news/DoubleDip-Recession-Fears-cnbc-1174470737.html;_ylt=AvBS2P_a27dnkOP2glaOXUC7YWsA;_ylu=X3oDMTE1ZW50dWlsBHBvcwMzBHNlYwN0b3BTdG9yaWVzBHNsawNkb3VibGUtZGlwcmU-?x=0&sec=topStories&pos=1&asset=&ccode=

    More and more people are saying it lending credence to my observation back on June 4th. BTW – Look at the distillate demand (refering back to my original post on the thread) it’s a tumbling…

    http://www.eia.doe.gov/oog/info/twip/twip_distillate.html#demand

    So what this is telling me is that we are in a period of rolling GDP trends hunting back and forth between pent up demand and momentarily satisfying that demand. There is no economic expansion, just a cycling between inventory restocking limits. IMO it appears many retailers are in sync with orders thus showing spurts of growth when in reality everyone is ordering at the same time then NOT ordering at the same time waiting for their inventory to hit the reorder limit.

    Comment by dscott — June 25, 2010 @ 10:34 am

  4. [...] the President of the United States is holding out for more recklessness, the Journal reacts as yours truly reacted (”Stimulus Officially and Abruptly Runs Out of Steam”) to the awful housing market news [...]

    Pingback by BizzyBlog — June 26, 2010 @ 8:00 am

  5. [...] A bit less than two weeks ago, news arrived that new home sales during May, the first month after a related tax credit program ended, “collapsed” by 33%. [...]

    Pingback by BizzyBlog — July 2, 2010 @ 8:25 am

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