Michael Pento recaps Tuesday's Existing Home Sales (or rather lack of)

Tuesday, August 24, 2010
By: Michael Pento

Apparently, this morning’s existing home sales report was shocking to most observers and sent the Dow Jones tumbling over 130 points. But the only people who should have been surprised are Wall St. sheeple and Washington shills. After the government finished—at least temporarily--buying houses for consumers and printing at least $1.5 trillion in order to push interest rates down, here are the results:

Existing home sales in July plunged over 27%, while transactions plummeted to a 3.83 million annual pace, the lowest in a decade. The National Association of Realtors also revised downward the June sales figure down to 5.26 million from a previously reported 5.37 million. Purchases of single-family homes also dropped 27 percent, the biggest one-month decrease in data going back to 1968. July’s single family 3.37 million annual rate was the lowest since May 1995. Compared with a year earlier, existing home sales fell 26% on an unadjusted basis.

Most troubling was the increase in the nominal number of homes for sale and the months’ supply. The number of previously owned homes on the market rose 2.5% to 3.98 million. At the current sales pace, it would take 12.5 months to sell those houses, compared with 8.9 months in June. The months’ supply of single-family homes at 11.9 months was the highest since 1983, according to the NAR!

The reality of this news is that the government will redouble their borrowing and spending efforts in order to artificially prop up home prices even further. More savings will be misallocated towards real estate and greater imbalances in the market will be created. The budget deficit will swell and economic growth will suffer to an even greater degree. And of course, thanks to government’s meddling with into the free market, the double-dip recession has now arrived. Unfortunately, this double-dip is only the overture to the next depression.

Michael Pento, Senior Economist at Euro Pacific Capital is a well-established specialist in the “Austrian School” of economics. He is a regular guest on CNBC, Bloomberg, Fox Business, and other national media outlets and his market analysis can be read in most major financial publications, including the Wall Street Journal. Prior to joining Euro Pacific, Michael worked for a boutique investment advisory firm to create ETFs and UITs that were sold throughout Wall Street. Earlier in his career, he worked on the floor of the NYSE.