Alhambra Investment Partners has a dire warning about the collapse in new household formation:
There was more bad news for real estate recently beyond the consistent declines in housing stats. The one factor that housing bulls have been awaiting is household formation, though so far that one has remained a drag. And that was supposed to be the catalyst, in that eventually Americans had to begin moving out once more. After so many years of holding back, new households should have begun to appear far more frequently.
The latest estimates from the Census Bureau have set that expectation back significantly. Not only has household formation failed to recover, it has actually gotten much worse – 2009 worse.
This major collapse in household formation is troubling enough for the real estate market, but the more powerful message may be that this is another huge warning about the current state of the economy. At least the ISM is somewhere above 50, though just how far is no longer as certain as it was this morning.
ISM revised the PMI twice yesterday — once up and then back down a bit, so that’s yet another number which is rapidly losing all meaning or connection to the real world. And then there’s this Zero Hedge headline:
Last quarter was a bad one, which everyone likes to blame on the weather. Problem is, April wasn’t much better. That means without a big rebound in May and June, Q2 growth is likely to continue with the total suckage, as Milton Friedman would (never) say.
It’s almost as if re-inflating a bubble just leads to another pop.