If you blinked, you might have missed the Dow Jones industrial average above 12,000 on Wednesday morning. U.S. stocks made a mid-morning jump after data showed that new home sales rose 17.5 per cent in December, over the previous month - well above the consensus expectation for a rise of just 3.5 per cent.
Investors initially liked seeing signs of life in the housing market, and drove stocks higher. However, those gains had evaporated by late morning after markets realized that the gains in new home sales were close to trivial: Sales rose to 329,000 at a seasonally adjusted annual rate, compared to a peak of about 1.4 million in 2005.
What's more, actual sales in December were just 22,000. According to Calculated Risk, that marks a new low point for December. Even way back in 1966, December sales were 23,000. Again, the best December was in 2005, when sales hit 87,000. Perspective is everything.
"The percentage rise in sales looks impressive but 10 per cent of next-to -nothing is still next-to-nothing," said Ian Shepherdson, chief U.S. economist at High Frequency Economics, in a note. "New home sales are bouncing around the bottom and we see no clear upward trend in the data yet. The next few months are unlikely to see any big change in that story, thanks to the spike in mortgage rates over the past couple of months. Indeed sales could easily slip back down again for a time."
David Berman