by Calculated Risk on 2/27/2008 02:20:00 PM

Click on graph for larger image.

This graph shows New Home Sales vs. recessions for the last 45 years. New Home sales were falling prior to every recession, with the exception of the business investment led recession of 2001.

Note that the escalation of the Vietnam War in the '60s kept the economy out of recession, even though New Home sales were falling. Although Chairman Bernanke didn't use the word "recession", it appears the U.S. economy is now in recession - possibly starting in December - as shown on graph.

This is what we call Cliff Diving!


The second graph shows monthly new home sales (NSA - Not Seasonally Adjusted).

Notice the Red column in January 2008. This is the lowest sales for January since the recession of '91.

As the graph indicates, the next 2 to 3 months are critical for the homebuilders. Right now it isn't looking good. Toll Brothers CEO stated this morning:

“The selling season, which we believe starts in mid-January, has been weak ..."