Home Sales and Consumer Confidence Are Both Down in May
The bad news in the housing market continues with a drop in sales in May. The Conference Board also reports a drop in consumer confidence for the same time period. I cannot to see how all of this is pointing to a strong Q2 for the economy and better growth throughout the remainder of the year. From the WSJ:
U.S. new-home sales fell in May, and this month's reading on consumer confidence dropped more than expected, weighed down by a stubbornly heavy supply of unsold homes, steep gasoline prices and a softening job market.
The Commerce Department reported that the nation's sales of newly constructed homes fell to a seasonally adjusted annual rate of 915,000 units, a 1.6% drop from April's downwardly revised 930,000 homes. The report also showed that the supply of new homes on the market would take about 7.1 months to sell at last month's sales pace, a slight increase from seven months in April.
Builders have been discounting unsold homes to reduce supply, but they face increased competition from sellers in the existing-home market and from foreclosed homes listed for sale. The National Association of Realtors said Monday that the inventory of existing homes increased to a 8.9 months' supply in May, the largest buildup since the previous housing slump in 1992.
S&P found that 4.21% of Alt-A loans (between sub-prime and prime mortgages) bundled into mortgage-backed securities last year were 90 or more days overdue after 14 months. That was up sharply from 1.59% for loans from 2005 and 0.91% for loans from 2004. The data exclude pay-option loans, which provide borrowers several choices for how much they pay each month.
The figures are the latest indication that the surge in defaults has spread beyond subprime mortgages, or home loans made to consumers with troubled credit histories. . . .
Meantime, a key indicator of consumer confidence dropped to a 10-month low this month. The Conference Board's index of consumer confidence fell to 103.9 from 108.5 in May, led by a downbeat assessment of the job market.