More bad news in good numbers

Existing home sales number were released this morning and on the surface, it seemed to be a solid win for the US – about time right? MoM existing home sales were priced into markets about a -0.9% clip but the numbers came out at 5.1% in the green. The NAR’s numbers are pretty solid drivers for the USD and these numbers were being carefully watched as January clocked in at a buzz-killing -5.9% MoM.

However, the deeper story painted is not a promising sign.

Consider:
– over 45% of the sales were foreclosures or short sales
– median existing home prices fell 15.5% (in one month)
– inventories rose 5.2%
– most of the increase was concentrated in the Northeast, with the South also doing ok

The picture painted is one where newly desperate homeowners are joining the existing desperate homeowners selling into a terrible market and the market is flushing itself out with increasingly severe price cuts. February should be viewed as a brief break before the housing market continues to plunge. The significance of the increases being located mostly in the Northeast can be attributed to many things but one explanation that seems the most credible is that the unemployment picture is not as bad as the industrial heavy MidWest or the tech heavy West coast.

This is a key number to watch in the upcoming months as it will be a key indication of the effectiveness of the Fed and Treasury’s recent moves. A housing market does not a recovery make but the story it tells should be a strong indicator of the bottom.