Home sales collapse to 21-yr low; very negative for renovations & consumption
Home sales declined further, slumping to near the lowest level in 21 years. The pace of falls accelerated from a trend of -10% y/y, to around -16% now. The turnover rate (sales divided by stock) collapsed to a ~record low recently. This is a very negative lead indicator for the renovations market and housing-related consumption.
Implications: UBS tighter credit thesis playing out; downside risk increasing
The UBS credit tightening thesis is playing out, with accelerating weakness in home prices, sales, approvals & credit growth. The peak-to-trough decline in home prices is still ‘only’ 6%. We have long expected a 10% drop, or more if regulators don’t ease. But now that APRA has effectively ruled out further macroprudential easing, the risk of an even larger fall has increased. If there is a policy maker desire to support housing, given increasing evidence of a negative spill over to the rest of the economy, it would need to cut via the RBA cutting the cash rate.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
