HOUSING UPDATE: NEW HOME SALES POP AHEAD OF EXPIRATION

New home sales exploded in March, beginning what we think will be a major buying push that will run through the next few months as the lagged data around the homebuyer tax credit comes trickling through. Remember, we're now just one week away from the expiration on the tax credit. The March data released this morning came in at 411k (seasonally adjusted annualized rate) vs. consensus for 330k and last month's print of 308k (the lowest level in 12 months).

 

HOUSING UPDATE: NEW HOME SALES POP AHEAD OF EXPIRATION - j1

 

HOUSING UPDATE: NEW HOME SALES POP AHEAD OF EXPIRATION - j2

 

Inventory fell to 6.7 months from 8.6 months last month (downwardly revised from 9.2 months). While inventory is down significantly off its 1H09 highs in the 11-12 months range, it is still above its normalized range of 4 months.

 

HOUSING UPDATE: NEW HOME SALES POP AHEAD OF EXPIRATION - j3

 

As was the case with yesterday's existing home sales print, this March print is a lagging indicator as it reflects deals closed two to three months ago (Jan/Feb). In our view, the relevant benchmark is how it compares with August 2009's print of 408k. Against that measure, it's flat. The original tax credit expired in November, 2009, putting August 3 months ahead of that expiration. The current credit (for closing) expires June 30 (April 30 for signing), which means 3 months ahead equals March.

 

To reiterate our message from yesterday, we continue to expect a pull-forward of activity not unlike what we saw going into last November. However, in the real world of non-lagged data, this means buying activity will have to be wrapped up in the next 7 days. The NAR has indicated that the tax credit has done its job and that a further round of stimulus won't be necessary. We think the jury is still out on that, and we remain rather skeptical. Our view is that this pull forward of activity is setting the stage for a much weaker-than-usual summer housing environment where inventory could back up into the 1H09 levels of the 11-12 months.

 

Here's a chart showing sales levels in historical context.

 

HOUSING UPDATE: NEW HOME SALES POP AHEAD OF EXPIRATION - j4

 

And this chart shows inventory levels in historical context.

 

HOUSING UPDATE: NEW HOME SALES POP AHEAD OF EXPIRATION - j5

 

 

Joshua Steiner, CFA

 

Allison Kaptur

 


Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more

Amazon's New 'Big Idea': Ignore It At Your Own Peril

"We all see another ‘big idea’ out of Amazon (or the press making one up) just about every day," writes Retail Sector Head Brian McGough. "But whatever you do, DON’T ignore this one!"

read more