New Home Sales Down Monthly, Up Annually; Optimism at Davos; Equities Bubble?
- Jan 28, 2013
The Census Bureau reported on Friday that U.S. new home sales dipped 7.3 percent from November to December (seasonally adjusted, since sales always go down toward the end of the year). That was an anticlimax for the year in new home sales, which have generally been on an upward trajectory. On the other hand, it’s also likely that the December figure will be revised upward, since most recent revisions to monthly sales totals have been positive.
New home sales for December 2012 were up 8.8 percent compared with the last month of 2011. For all of 2012, the bureau estimates, 367,000 new homes were sold nationwide, a 19.9 percent increase from 2011, when buyers closed on 306,000 units. The last time new home sales went up on a year-over-year basis was 2005, when the housing bubble still had some momentum.
No one’s calling the recent uptick in new home sales a bubble, however. A total of 367,000 new home sales for 2012 makes it the third-lowest total since the government began tracking such sales during the Kennedy administration. The worst year was 2011, which saw only 306,000 new homes sold, while the second-worst year was 2010, when the total was 323,000. Even 2008, at 485,000 units, saw more sales than 2012.
Optimism at Davos (Mostly)
The meeting of economic panjandrums at Davos, Switzerland, formally called the 43rd World Economic Forum Annual Meeting, ended over the weekend after five days of highly publicized talk about the state of the world economy. By most reports, the mood at Davos this time around was more optimistic than during other recent meetings, perhaps because eurozone problems seem subdued, and because for all of the tomfoolery evident in U.S. politics, the American economy has managed to avoid a new recession (unlike Europe).
Much of what emerged from Davos this time was the kind of things politicians say in high-profile situations, such as the comment by British Prime Minister David Cameron that Europe needs “more political will, not more political institutions.” German Chancellor Angela Merkel reiterated her support for reforms of financial governance structures in the eurozone, noting that results are starting to show and Europe is “going in the right direction.”
A number of other ideas were bandied about at the conference, such as the notion of Africa’s new-found dynamism; participants heard that Africa is now the second-fastest growing continent, with SAB Miller chairman Graham Mackay asserting that the rate of growth there could easily double if “certain bottlenecks” were removed. Nouriel Roubini, who seemed to want to continue as Dr. Doom, warned that extreme weather was going to cause more damage to various parts of the world in the near future.
Wall Street ended the week on a positive note on Friday, with the Dow Jones Industrial Average up 70.65, or 0.51 percent. The S&P 500 gained 0.54 percent (to close above 1,500 for the first time since 2007) and the Nasdaq advanced 0.62 percent.
At a closing of 13,895.98, the Dow is approaching all-time highs. Only in 2007 was it ever higher than 14,000, and that only briefly. Do recent advances mean that equities are bubbling? Perhaps so, if the CNNMoney’s Fear and Greed Index means anything. The index tracks seven indicators, including stock price momentum, stock price strength (the number of stocks hitting 52-week highs), the spread between yields on investment grade and junk bonds, and more.
Near zero on the index indicates “extreme fear,” a time when stock prices are crashing, while near 100 indicates “extreme greed,” when stocks are headed skyward because of high demand for shares. The most recent updating of CNNMoney’s Fear and Greed Index (Jan. 25) put it at 94, which is well within the “extreme greed” range.
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