The first inning of a recovery
After another humiliating, hitless loss for the Bad News Bears (1976 version), Ogilvie the statistician pointed to the good news. For instance, several Bears players actually hit foul balls. “And two of our runners almost made it to first base,” Ogilvie added.
“These positive stats—“signs of recovery”—were roundly celebrated as important achievements for the struggling team.
Is the housing market going through its “Ogilvie moment” of inflated optimism during tough times? Maybe. It’s just human nature for people hoping for improvement to see signs of improvement. But while many key metrics remain bleak on a year-over-year basis, a picture is coming into focus of a market entering recovery mode:
June new single-family home sales increased 11% over May.
For the first time in years, the Case-Shiller index of housing prices did not go down.
Existing-home sales were up for the third straight month.
Agovernment report showed the economy has stopped the bleeding. From a 6.4% contraction in the first quarter, the second quarter showed a 1.0% contraction.
June single-family starts were up 14% over May, marking four straight months of growth.
It’s important to point out that when the July starts data are published by the Commerce Department on Aug. 18, it will certainly show yet another year-over-year decline—40 in a row. It’s a depressing streak, for sure. But it’s only natural that monthly figures will be the first to turn, and the turn is what we’re looking for today.
And here’s a hidden indicator: When you Google “signs of recovery,” right now, you get about 170 million results. Obviously, Google results of a recovery do not help the 350 companies that appear in our special Top 350 Scoreboard. They need the real thing. Only 30 companies on the entire list posted year-over-year sales increases, a record low.
Many pro dealers have told us that it’s hard to get excited about 470,000 single-family starts, when the rate stood at more than a million as recently as July 2007 (and 1.8 million in February 2006). A response to this is: The recovery has to start somewhere.
Numbers, of course, don’t tell the whole story. One of the best economic indicators in the home channel is the one that Buddy Klumb, of Alabama distributor Klumb Lumber, described to us earlier this year. When he drives along the country highway past subdivisions, he looks for signs of fresh lumber and panels going up. When he sees them, that’s his indicator of a recovery.
The good news is, he’s seeing them. A few patio homes are springing up here and there. “Our bottom line: We are optimistic and love the upbeat sales and starts figures, but it hasn’t translated into much, if any, new business,” he told us recently.
My take: We’re in the first inning of a recovery.