It’s taken on faith in the shipping world that the volume of trade moving through ports, railyards and truck terminals is a leading indicator of the economy’s direction. But transportation operators looking for signs of life in shipping demand should start looking toward home — home sales, that is.
Too much of the anxious commentary over the “soft patch” in May and the weaker July (a double-dip soft patch?) has ignored the economic elephant in the room.
Yet the housing market at the heart of the 2008 U.S. economic implosion simply hasn’t recovered, and it’s hard to see how anything approaching normal demand will return to the manufacturing and retail worlds — and so to the trade and shipping economy — until some sort of equilibrium returns to the housing market.
Moffatt & Nichol economist Walter Kemmsies this past spring said a true, sustained recovery was unlikely in the shipping world until that foundation of the broader economy, the wealth and stability that underpins consumer confidence and growth, gets off the mat.
Banks only now are beginning to write off the huge losses they were hit with when the housing bubble burst, Kemmsies said, so their lending ability has been restrained.
But that lending ability will have to improve, allowing potential home buyers to take advantage of the home prices that have retreated from those unnatural highs, before true demand in retail and manufacturing will start feeding serious, stable and reasonably seasonal movement of goods.
Unfortunately, the latest signs in the housing market don’t promise much of a peak season.
Sales of previously owned U.S. homes fell 0.8 percent in June to a seven-month low, according to the National Association of Realtors. And the backlog of unsold existing homes reached its highest point, 3.8 million, since November 2010.
Radar Logic, a housing industry research group, reported last month its RPX Composite Price index fell 5.9 percent in May, the fastest rate of decline since September 2009 and an extension of the year-over-year acceleration in the decline that has been occurring since June 2010.
“The lackluster performance of the RPX Composite Price to date means that we are almost assured to see new post-bust lows in the fall, when seasonal strength comes to an end and softening demand pulls housing prices downward,” the group said.
The group hasn’t even found much evidence of a recovery over the past year when it looks for comparisons to what it describes as normal historical patterns. The count for home sale transactions in May 2011, in fact, was 20 percent lower than the average number of transactions in May going back to 2000.
When will “normal” come back? “Housing demand has languished since the bust due to widespread negative equity, tight lending standards, high down payment requirements, weak consumer confidence and uncertainty over future home prices,” the group said. “Home sales will not return to ‘normal’ until these fundamental factors improve.”
Until that happens, don’t bet the mortgage on a rebound.