onsdag 25 mars 2009

Fresh data

Today, we got to know that New Home Sales increased 4.7 % compared to the previous month. As I have written before, my hunch is that this variable has bottomed, with enormous implications for GDP projections, and thus for the stock market.

The whole crisis we are in today is a direct result of the housing depression. If housing has bottomed, so has the crisis. Let me be clear: when I write about a bottom in housing, I am refering to Sales of New Homes. Existing Home Sales have probably a lot further down to go before they reach the floor-- currently, 45 % of all existing homes sold are distressed. As foreclosures decrease, we can expect a drop off in such sales. Exerting opposite influence, however, will be the demand created following the bottom of GDP contraction.

Thus, I would not be shocked if New Home Sales in the month of December, 2009, would be at a SAAR of 550. The rate of existing home sales could at the same time be down 20 %, compared to today.

The stock market has most likely bottomed for this cycle, and will probably not retest the lows reached earlier this month.

I also believe the current recession will end in Q3 or, at the latest, by Q4 of this year.

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