The last several months have provided an abundance of conflicting economic indicators. A stellar earnings season and surge in M&A activity gave investors hope that corporate profits were on the rebound. But stubbornly high unemployment and sagging consumer confidence have remained as major roadblocks to prolonged growth. With U.S. markets treading water recently, many investors have been looking for a catalyst to give equities direction heading into the fall quarter. Be careful what you wish for; that catalyst may have finally appeared in the form of a disastrous housing report.
According to The National Association of Realtors, the seasonally adjusted annual rate of sales was 3.83 million units in July, a 27.2% drop from the downwardly revised 5.26 million-unit rate in June and a 25.5% drop from the 5.14 million-unit level in July 2009. This figure represents the lowest sales level since 1999 and the lowest rate for single-family homes in more than 15 years. More importantly, the level reported Tuesday was close to one million units less than analyst expectations. “From our vantage point, the first time home buyers credit pulled forward demand–by definition this is what stimulus measures achieve–however the issue this time is that there was so little demand to be pulled forward, the credit has left no demand for the summer,” Dan Greenhaus, chief economic strategist for Miller Tabak
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