The Keynesian Money Printers Repudiated Again: June New Home Sales Swoon

David Stockman reports:

New home sales during June really hit the skids, posting a 8% decline from May and a 11.5% drop from last June. Also, May was revised sharply lower to 442k from 504k and April and March were revised lower by 24k. The three-month downward revision thus totaled 86k. So much for the great housing recovery euphoria that occurred this spring. It flat-out didn’t happen.

In whole numbers, the print came at a paltry 406,000 annualized rate compared to Wall Street expectations of 475,000.

The interesting thing is not simply that the Keynesian Cool-Aid drinkers who pass for Wall Street economists got it wrong again. Actually, as can been seen clearly in the chart below from the Wall Street Journal, the June 2014 number for new home sales was exactly the same as the 400,000 number posted right after the financial crisis in the fall of 2008.

So let’s see. Between those two points the Fed’s balance sheet has exploded by 5X—- from $900 billion to $4.4 trillion. In the process the Fed caused long-term interest rates to plummet to rock-bottom sub-economic levels. It even brought more than $1 trillion of mortgaged backed securities to force mortgage rates down to stupidly low levels—-which reached a bottom of 3.3% on 30-year money about 14 months ago.

Just consider the implications. Our benighted monetary politburo decreed a “housing recovery” from the still smoldering remains of the previous bubble it had created. To that end, it forced rates on 30-year fixed rate money to levels that did not even cover the cost of the trend level inflation (2.0-2.5%) and taxes—-to say nothing of compensating for the self-evident default risks in the mortgage market. About the only thing this assault on honest free market economics actually did, however, was to offer a few million, better-off mortgage borrowers— who weren’t underwater—one last go at the “refi” windfall game.

So here we are after 68 months of ZIRP and QE madness, and new home sales are still sitting on the flat-line. There has been no sustainable impact on the new home market whatsoever. Zero. Nada. Nichts. Nothing.

Printing money doesn't cause prosperity no matter what your local Keynesian economist tells you.