Recession watch

New home sales declined again in February. History predicts an economic downturn.


Andrew Leonard
March 26, 2007 9:13PM (UTC)

If the blogosphere has a single credo to hang its collective hat on, it should be reporter A.J. Liebling's classic boast: "I write faster than anyone who is better than me, and better than anyone who is faster."

It's easy enough to dash off one line or one paragraph linking to news of something happening elsewhere, reported by someone else. It's significantly harder to analyze what that news means and add significant value. Today's nominee for showing us how this is done is the economics blog Calculated Risk -- probably the best one-stop shop, right now, for news and analysis on the housing market.

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The Census Bureau reported today that new home sales declined in February by 3.9 percent, compared to January (and by 18.3 percent compared to February 2006.) The Wall Street Journal called this "surprising" -- though, at this point, the fact that anyone would consider new bad news from the housing sector as surprising is, well, kind of surprising.

At 6:33 a.m. Calculated Risk reported the Census Bureau's numbers, complete with a sheaf of enlightening charts. A little less than two hours later came the analysis, highlighting a disturbing data point connecting past recessions with home sales data.

Over the last 35 years, sales of new homes fell sharply "prior to every recession, with the exception of the business investment led recession of 2001. This should raise concerns about a possible consumer led recession in the months ahead."

Correlation, we are often told, does not prove causality. Maybe it's just a jolting coincidence. Wall Street certainly didn't like the news, falling sharply at the opening of trading before stabilizing somewhat by midday. But the skittishness of Wall Street investors only lasts until the next narrative dawns on them -- Hey, maybe the bad housing data will encourage the Fed to lower interest rates, which will boost the economy, so stop selling, it's time to buy! So who knows?

I don't, certainly. But I do know that when I'm looking for insight on how to interpret the latest housing numbers, the first place I find myself turning to for quality analysis, delivered with awesome speed, is Calculated Risk. The blog has two chief posters, the namesake, "Calculated Risk," who describes him or herself only as "a senior executive, retired from a public company, with a background in investing, finance and economics," and "Tanta," a "former bank officer and mortgage lending specialist." Anonymous, yes, and yet at the same time, compellingly authoritative.

UPDATE: Calculated Risk informs that he didn't actually report the housing data a half hour before the numbers were released. The time stamp reflects when he began creating the blog post.

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Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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