No Fast U.S. Recovery, Caution Reports from Housing and Oil Industries

June 22, 2020 (EIRNS)—Last week’s market-boosting chatter about how housing construction and sales were charging back, has been shown untrue. It came from one large construction company and, as usual, from the American Association of Realtors’ chief economist, Lawrence Yun. Today some truth came from the U.S. Commerce Department: Existing home sales fell by almost another 10% from April to May, and were then 26.6% down from May 2019, at an annual rate of 3.91 million sales, which sounds like 2009. Some home sellers withdrew their listings, fearing the (so far small) drop in existing home values which is going on; and mainly lower-priced homes were sold.

Giving a further sign that the spring economic collapse is not turning around, the share of American households not paying rents or mortgages is still 30% in June, according to a firm called Apartment List Survey Corp. The non-payment rate was 24% in April; 31% in May; and 30% in June. There was little difference (just 29% compared to 32%) between mortgage holders and renting households which did not make payments this month.

Then, there is a report on the shale oil/gas industry. The U.S. shale industry is entering a period of “great compression” and could face up to $300 billion in losses and a wave of bankruptcies, the global accountancy firm Deloitte said in a new study on June 22. The report said challenging oil market and economic conditions could prompt the shale industry in aggregate to impair or write-down the value of their assets by as much as $300 billion—with significant impairments expected in the second quarter of 2020.

“As a result, the leverage ratio of the industry could increase from 40% to 54%, potentially setting off a chain reaction of insolvencies and restructuring,” it concluded.