The National Association of Realtors is blaming "unusually bad weather" in February for a sharp 8.4 percent drop in existing home sales recorded in March, as compared to the previous month. Maybe so, but the biggest month-on-month plunge in 18 years is still news, handily wiping out the gains recorded in the previous three months.
A month ago, the NAR was delighted to accompany February's 3.9 percent existing home sales uptick with the news that it was the "the fifth straight month where home sales have exceeded the low posted in September 2006." That streak has been broken -- March 2007 represents a new low.
The new data also offers us an opportunity to look at some trends that are not being affected by heavy rain or snow. The Wall Street Journal has a fascinating article today by Joel Millman tracking a steady decline in remittances sent home by Latin American construction workers in the United States. The consistent monthly decreases track the slowdown in new home construction perfectly.
Monthly remittances from the U.S. to Mexico have dropped every month since their peak of $2.6 billion in May 2006 -- shortly before new-home construction in the U.S. plunged. In February 2007, the latest month for which data are available, remittances to Mexico had slowed to $1.7 billion.
Mexico, Latin America's remittance leader, may be a leading indicator of a trend unfolding across the continent. In a recent study of 15 Latin American economies tracked by BCP Securities of Greenwich, Conn., all but three showed better than a 90 percent correlation between the ebb and flow of U.S. housing starts and the swelling and shrinkage of remittances as recorded by the nations' central banks.
The Journal article fits together nicely with last week's New York Times article by Eduardo Porter suggesting that the reason construction employment numbers in the United States aren't falling by as much as one would expect, given the housing slowdown, is that the brunt of the bust is hitting illegal immigrants who don't show up in the employment statistics. The Journal even notes that "apprehensions of attempted [border] crossers are down just over 10 percent during the first quarter of this year from the same period in 2006." The explanation: Jobs are drying up.
As the housing slowdown has lumbered along, we've been watching like hawks to see whether there'd be an effect on the global economy as American consumers started spending less, presumably because they would find it harder to extract cash from their home equity. A paper co-authored by Alan Greenspan and released by the Federal Reserve this week documents that since 1990, Americans have indeed increasingly depended on such funds to pay for personal consumption -- typically, they've been refinancing their homes to help pay off their credit card debt. But so far, signs that Americans are getting pinched by the bust -- outside of the boom in foreclosures -- are in short supply.
Where does the decline in remittances figure in to this equation? Is it a sign of things to come, or an isolated response to the bust that will switch directions as soon as builders rev up their engines again? The NAR is telling us that good weather in March should signal a boost in new home sales, when the data for that economic indicator are released later this week. The most recent numbers for housing starts and building permit applications are up, slightly. Maybe remittances will follow along. Or maybe the subprime meltdown, which most analysts think hasn't yet showed up in the housing data, will skew things in a bleaker direction.