Never before have new home sales gone on to make a new cycle low after a recession ends — until now. In fact, in practically every other cycle, housing is the first sector to bottom and lead the economy out of the downturn. This time around, it has been the federal government — bailouts and repeated stimulus — and a production bounce as inventories get realigned with a sales environment that may be weak but never went into the abyss. That said, without the traditional credit-sensitive sectors leading the economy into the upturn, as has traditionally been the case, then it is hard to believe we are going to see a sustainable recovery.
These are valid points that the stock market is currently ignoring. I continue to believe this “recovery” is nothing more than an economic “dead cat bounce” amidst a larger “balance sheet recession.”