UPDATE: It appears that I misinterpreted the cited data on home sales, though I elect to shift the blame to the poor labeling of the Census Bureau data set (linked in original text).  The 33,000 per month I cited reflects only new home sales.  The correct number for monthly home sales is well over 400,000 per month.  However, one is left to wonder whether, in lack of the $8,000 first time home buyer tax credit, demand for home sales would still exceed foreclosures.

Between January and mid-September, over 1.4 million claims for the tax credit were made.  Those 1.4 million are spread over 8.5 months, which means that about 165,000 claims were made monthly.   Over the same period, total home sales averaged roughly 450,000.  Those monthly tax credit claims subtracted from 450,000 results in a number below the 300,000 monthly foreclosures.  Given the number of variables in play, it would be extremely difficult to determine how many of those sales would not have taken place in lack of the credit, but it is safe to assume that some significant portion would not have occurred.  With this assumption in mind, it seems clear that foreclosures would at least come close to negating total home sales were it not for the tax credit.  In any case, this is not a promising sign for the health of the economy.

Even with the $8,000 first time home buyer tax credit, which has just been extended and broadened in scope, foreclosure filings continue to outstrip home sales by nearly a factor of ten.  Recent data pegs foreclosure filings at above 300,000 for the eighth straight month.  By contrast, monthly home sales hobble in at an average of roughly 33,000 since January of this year.

The administration has been quite eager to tout recent GDP growth as an indication that a recovery has begun.  There are myriad other reasons to doubt that recent GDP growth is a sign that economic recovery is on the way, but these foreclosure numbers demonstrate just how meaningless claims of recovery really are.  The GDP is easily manipulated, as we have seen, by way of targeted government spending such as the housing tax credit.  But people are the real economy, not the GDP.  It is a profane notion that artificially created GDP growth should be should be taken as a sign of recovery, even as hundreds of thousands continue to receive pink slips and eviction notices.

We will have cause to celebrate when employment numbers begin to rise and inflation-adjusted, post-tax, average household incomes undergo a period of sustained growth, and not before.