A big bull turns and runs
I interviewed Justin Urquhart Stewart of Seven Investment Management a few weeks ago. He’s a sensible sort – not too bearish, not too bullish. I asked what he thought was the key thing to watch for those hopeful of economic recovery. His answer? The American housing market.
Until that recovers, or at least stabilises, he says, nothing else will. So what’s going on in the market? Listen to the bulls and you’d think the crash was all but over. Numbers out this week showed that new home sales rose 0.3% between March and April, enough to bring on mutterings all over the place about green shoots and bottoms.
But this number, 0.3%, is a statistical irrelevance. It’s not final – it’s an estimate from the US Census Bureau and the Department of Housing and Urban Development. And it comes with a margin of error of well over 10%. So when it’s revised we could find that sales in fact fell, say, 12%.
Look instead at the more representative year-on-year estimates and you’ll see the numbers show house sales down 34% (the margin of error here is also big, but 34% is large enough to be statistically relevant). Prices aren’t looking up either: the median new-house price was down 15%, and the Case Shiller house-price index shows prices down 19% year-on-year and over 30% from their highs.
It’s hard to see how this trend can change.
• Read the full editor’s letter here: MPs must cut public spending