What can you say about this month's housing news? Calculated Risk suggests:
[Today's Census Bureau New Residential Construction] report shows builders are still starting too many projects, and that residential construction employment is still too high.
The Skeptical Speculator seconds the emotion...
As I've said before, the housing market will take a while to recover, especially with the prevailing trend in interest rates.
... and Barry Ritholtz makes it unanimous:
... despite the hopes of the bottom-callers, there is still a ways to go.
The Nattering Naybob likes the way the folks at the National Association of Homebuilders sum up the situation:
Inside the number: The lowest builder confidence since 1991. NAHB President Brian Catalde:
"Builders continue to report serious impacts of tighter lending standards on current home sales as well as cancellations, and they continue to trim prices... to work down sizeable inventory positions."
Flyin in the face of Fed speak: "Home sales most likely will erode somewhat further in the months ahead and improvements in housing starts probably will not be recorded until early next year.
As a result, we expect housing to exert a drag on economic growth during the balance of 2007."
I'm not so sure "flyin' in the face of Fed speak" is a completely apt characterization. Calculated Risk, for example, cites Nouriel Roubini citing the Financial Times citing Ben Bernanke:
Changes in house prices could have a bigger effect on consumption than the traditional “wealth effect” suggests, Ben Bernanke said on Friday in comments that offer some insight into how the Federal Reserve may think about the continuing problems in the US housing market.
The Federal Reserve chairman told a conference hosted by the Atlanta Fed that, in addition to making homeowners richer or poorer, changes in house prices might influence the cost and availability of credit to consumers.
Greg Ip expands on that theme (hat tip, Brad DeLong):
Ideas that Ben Bernanke pioneered years before becoming Federal Reserve Chairman could prove important in evaluating how financial stress, such as the subprime mortgage mess, affects the economy.
... Although Mr. Bernanke doesn’t say so specifically, the record level of consumer leverage today means a change in asset prices (such as homes or stocks) can produce a much larger change in consumers’ net worth, and as a result their ability to borrow and spend. “If the financial accelerator hypothesis is correct, changes in home values may affect household borrowing and spending by somewhat more than suggested by the conventional wealth effect,” that is, the tendency of a changes in asset prices to make consumers feel more or less wealthy, and thus spend differently. That is because “changes in homeowners’ net worth also affect their … costs of credit.”
It is clear that some are willing to assert that this scenario is more than hypothetical. Again from Calculated Risk:
From the LA Times: Report from UCLA team skirts the R-word
"We suspect that the weakness in the housing market is finally spilling over into consumption spending," wrote senior economist David Shulman in the quarterly forecast being released today. "Retail sales appeared to stall in April and automobile sales have become decidedly weak.
"This is not a recession, but it is certainly close," Shulman said.
To tell you the truth, I'm not quite sure what Dr. Shulman finds so convincing. Under the category of spilling over, I think Greg Ip offers the right entry:
As yet, there has been little spillover from these developments into consumer spending or the economy overall.
As for a conclusion, I'll sign on with The Capital Spectator:
For mere mortals, the only reaction is wait, wait for more data. Yes, we've been waiting now for months and still we've no clarity. Grin and bear it.