This page has been archived and commenting is disabled.
New Home Sales Plunge To All Time Record Low, 309K SAAR Is Huge 11.2% Sequential Drop, On 355K Estimates
The housing sector just went back from critical to comatose - U.S. new-home sales plunged in January, setting a record low and erasing all gains made in the market during the past year. Well, if new homes can't sell now with all the current bells and whistles, they pretty much never will. One idea - lower prices. Oh wait, that would go against the first directive of the Federal Reserve. Equities still a little shell shocked, and unable to fathom that the double dip is now official.
If you didn't get all you need from the chart above, here is some more from Dow Jones:
Demand for single-family homes fell 11.2% from the previous month to a seasonally adjusted annual rate of 309,000, the Commerce Department said Wednesday.
Economists surveyed by Dow Jones Newswires had estimated sales would rise 3.8%, to 355,000.
It was the third drop in a row. Sales in December fell 3.9%, revised from an originally reported 7.6% decline.
The 11.2% decrease carried sales to their lowest ever. Records began in 1963. Sales fell below the level of 329,000 in January 2009 that analysts had considered the bottom for the market. Over the past year, sales had climbed, albeit slowly and unevenly, because of low prices, low mortgage rates, and tax incentives. But Wednesday's report wiped out the advance and showed, year over year, sales were 6.1% down from January 2009.
While the report Wednesday was depressing for the housing sector and cast serious doubt about the housing recovery, the government last week released data containing promise for future demand. It reported single-family home construction permits inched higher in January after two solid gains. The third straight increase suggested builders might be stocking up on permits in anticipation of demand from the extension of the home buyer's tax credit. The $8,000 incentive for first-time buyers was renewed through April.
Wednesday's new-home sales data showed inventories picking up slightly. There were an estimated 234,000 homes for sale at the end of January, up from 233,000 in December. The months' supply at the current sales rate rose, to 9.1 from 8.0 in December.
The median price for a new home fell, year over year, in January by 2.4%, to $203,500 from $208,600 in January 2009.
Regionally, January new-home sales dropped 35.1% in the Northeast, 11.9% in the West, and 9.5% in the South. Sales rose 2.1% in the Midwest.
»
- 8919 reads
- Printer-friendly version
- Send to friend
- advertisements -
Unaffordable is right. In my local area, median home prices are 4.5x my annual income. Just how am I suppose to buy anything?
Well if you are flipping burgers at the local burger hut you may not be a candidate for a home. Not everyone is supposed to be able to buy a home, you know.
Good point, noted, agree.
I should clarify that it's not just me: The spread between the median income and the median home price in my local area is approximately 4x gross income (no hard stats, just a guesstimate based on ancedotal experience).
True enough but when the crews at Mickey D's are staffed by former engineers and production managers, what does that say about housing prospects???
IMWTK
"Not everyone is supposed to be able to buy a home, you know." Not necessarily ... if there's demand (for low priced houses) there should be an offer also. The problem is/was not burger flippers buying houses but is/was burger flippers being pushed/allowed (exotic mortgages, MSM/peer pressure, own greed, lax legislation) to buy houses more expensive than what they could afford.
Harsh!
This ain't no 2004 no more!
Better start smoking the green shoots while they last.
I can see the CNBC headline now. Lower new home sales indicate pent up demand waiting in wings, buy now ahead of the rush.
Well, so far they aren't doing the cheerleader bit as I expected. But the day is young.
That's only because the three ring circus is in town. Ben at 10, Toyota at 11.
Wonder if anyone will ask Ben about his defective accelerators
Wonder how Ben's damage stacks up to Akio's
Wonder if Ben will apologize
I'm surprised that "bad weather" hasn't been used as a convenient excuse.
"The association blamed bad weather for the slump in home loan demand."
http://www.cnbc.com/id/35560213
lol...
Because clearly it's the first year since records began that there's been bad weather in January.
Actually most of the East coast is experiencing a "once in 50 years" series of bad winter storms. So that works nicely with this "weather" excuse and I'm sure it will be played for all it's worth.
Regardless, the toilet was flushed years ago. It just takes time for all those "little" turds to make their way to the treatment plant.
And the "analysts" that Reuters polled expected new home sales to increase to a 360,000 unit annual pace from December's previously reported 342,000 units.
Maybe these "news agencies" should update the Rolodex.
http://finance.yahoo.com/news/New-home-sales-drop-to-record-rb-286844554...
This is just typical market psychology. Nobody will buy the dips (even if prices are lower), yet everybody and their cat will try to get a mortgage at the peak of the market and overpay for a house. You have to remember that 95% of Americans are too complacent and stupid to understand any economic sense.
I'd buy a house in the Cali area for $80/sq ft. Wake me up when that happens...
Bank Fail? — No Heary;
Taxpayer Fail ? — Of Course: Regulators are “our agents, and therefore we fail”
"Our agents" ? At 24:27 into the“The Diane Rehm Show” (WAMU / NPR), this Monday 22 Feb —
Caller Joel, from Ann Arbor, MI: …this is the first time I’ve heard people seriously talking about changing the bankruptcy law, and I think that’s key. The, uh, secondly, uh, we can’t pretend our way out of this crisis. Uh, the banks will fail and the only way to deal with that is for the government is to increase taxes and uh play the role of financing uh business and small business ventures directly. I’d like a comment and a response to that last remark, if you would.
Katty Kay: uh, ok, Mark, your response to Joel’s...
Mark Zandi: I I didn’t hear, his first part was about the bankruptcy laws and he was advocating that they should be changed
Katty Kay: Yeah advocating that they should be changed
Mark Zandi: Um, I think that’s a second-best policy solution, uh, because you’re breaking a contract and one of things that has made our economy what it is is our, uh, belief in the value of those contracts. Everyone believ—understands that if they sign that thing that you know they should follow it through and that has really made our economy what it is. So changing the laws, uh, uh, I think is a second-best solution. Now, best solution is, I think, is for, uh, the the administration to come forward with some of that TARP money that’s still remaining there, uh, for homeowners, and
Katty Kay: and more than the 1.5 billion that was announced on Friday
Mark Zandi: Yeah, there’s you know conservatively speaking probably 25-30 billion left in the TARP fund for homeowners that hasn’t been allocated. I would use that to incent a principal write-down for a very specific group of homeowners that got loans that at when they got the loan it was unaffordable by definition and therefore it was a regulatory failure that they got it and as a result you and I as taxpayers have a responsibility to making good to those homeowners because our regulators failed, uh, they’re our agents, and therefore we fail.
[Caller Joel not from heard again]
The Diane Rehm Show: “Foreclosure Risks in Home and Commercial Real Estate Markets”
http://wamu.org/programs/dr/10/02/22.php#29475
Monday February 22, 2010
Guest host: Katty Kay
Guests
Mark Zandi, chief economist of Moody's Analytics and author of "Financial Shock" and the forthcoming book, "Paying the Price."
Damian Paletta, reporter, Wall Street Journal
Kathleen Day, Center for Responsible Lending
"I would use that to incent a principal write-down for a very specific group of homeowners that got loans that at when they got the loan it was unaffordable"
Bingo, unafforable. The homeowners knew, the banks knew it, everyone knew it. No one is innocent here, no one (((deserves))) being bailed out. Especially with taxpayer money.
This is an indicator of increasing future supply, not demand. Bearish for prices.
Funny how easily they were able to turn that into a plus, huh?
In my area, most construction work is done by illegal day workers. The wages go to Mexico, and there is very little lift to the local economy. I don't know who is making money off these build-outs; one assumption is that the developers are leveraging public funds (redevelopment money mostly) and have little of their own skin in the game. If they bet right they win, and if they bet wrong the taxpayers lose.
That's what I thought...
I wonder what percentage of homes these days are spec homes, Vs those built for a pre-determined owner/buyer.
[spec homes, Vs those built for a pre-determined buyer]
From my daily bike commute through Silicon Valley (not the best barometer perhaps) I'd estimate 40:1
They have no actual clients. They are building ghost towns just to stay in business and keep public housing redev money rolling in.
California at least is bankrupt and shortly there will be no public money teat to suck on. The housing development implosion cannot be more than 12 months out at this point. Most of these developers will vanish and never return. Their business model is finished and will never be witnessed again. Squatters will be living in these homes that have no chance of ever selling.
I did a little research recently on the costs involved in getting a custom home built (Vs buying a spec home). The difference was extraordinary. No surprises you'd have to pay more for something that wasn't cookie cutter, but double (or more)...?
Seems most builders aren't interested in building random one offs, so those that are charge a wicked premium.
define "most builders"
Long time custom home builders (its all they do) will still be around. Many have downsized pretty substantially. Some have a few jobs going this spring. But the heyday of charging stupid prices and the customer said ok anyway are way over. The best with good resumes could charge whatever they wanted to the highest bidder that wanted to build NOW.
The hacks are already gone. Good riddence. Architects are starting to see a bit of business again so that means it may pick up a bit this year. But many Arch firms have shut the doors too.
If you are in construction long enough you see that it becomes a magnet for many, many people who are unemployable any where else. Not because they are stupid and have no skills, on the contrary. They are people who can't work for anyone else because they are sociopaths. Where else can you have a screaming match that might even come to blows in the workplace and not get fired? Construction became hot so they naturally were attracted to the business because there was money to be made and there was a huge demand for a number of years. Now these transients move on to the next "deal"
The important issue from a "statistical" standpoint is not to count people that were only in the business for 5 to 7 years among those that have "exited the business".
Well, as an insider, the rejonder to that is that no bank is going to allow a draft on the construction revolver unless you've got a real, non-contingent buyer with a substantial deposit in the wings. Banks are highly intolerant of "specs" right now. So to the extent there are more building permits, I'd say all things being equal it is because there was a modest upturn in real contracts.
But, trust me, this is all talk about a corpse twitching and assuming it has rejoined the living. Housing is in the dumps, and the end of QE spells trouble for an industry that is highly, highly dependent on the nationalized mortgage industry. No mortgage, no buyer. No buyer, no demand. No demand, increased supply, redundant projects, default and decreasing values. Banks hurt, restrain ending to recover, rinse and repeat the deflation cycle is unstoppable, unfortunately.
I heard from a couple of people that the banks are hiring contractors to fix the empty/forclosed homes they have.
I have seen a few around my neighborhood that have been empty for over a year being fixed up and put back on the market.
Also, alot of these contractors are buying them from the banks and fixing them as spec. homes. They are trying anything to make money.
Buying them from the banks for cash? The banks are not loaning them $$$ for the purchases.
Who knows?... Its a great time to wash those drug dollars and I'm sure the banks and law enforcement authority's would turn a blind eye... Just a spontaneous thought ;-)...
I would love to be able to answer this question. The people I see around here doing this look like illegals too me, but who knows. They are living in them until the work is done. I have seen only one sell so far after they are finished.
I talked to a friend who got some work fixing up a forclosure and he said it was the builder who took back the home from the bank to fix up and sell. In these cases I'm sure they are getting some great discounts from the banks?
There have been a number of stories of cash purchases throughout the Southwest. I am sure this will spread to other areas of the country.
The neighbors are skeptical but glad not to have half the houses on the street vacant. That is of course until the new neighbor's "business associates" arrive with automatic weapons.
How can that be?! Bloomberg had on it's scrolling ticker this morning that "New home sales probably were up"
I like it. Forward thinking. No messy investiagtive journalism required. Report the data before it happens...
Maybe ESPN can start scrolling unqualified opinions as "news" such as:
"Indianapolis Colts probably win superbowl."
I used to watch CNBC and read zerohedge. Then I watched Bloomberg and read zerohedge. I now only read zerohedge.
If I did that, I'd be too scared to sleep at night. :(
Sugar in the espresso is sometimes needed to stomach it.
Bloomber has turned to total shit.
Well, at least that is consistent with the stock market, the housing maket, the economy, the U.S. gov't, etc. Its all turned to shit. I'm just waiting for someone to finally light the damn match already!
zerohedge -- a revelation, denninger OK, UK Telegraph OK. Other sources are OK for numbers. This site is a wonder.
Once more into bizzaro world:
"...the government last week released data containing promise for future demand. It reported single-family home construction permits inched higher in January after two solid gains. The third straight increase suggested builders might be stocking up on permits in anticipation of demand from the extension of the home buyer's tax credit."
This number increased because the builders have no choice. If you are a home builder you make money by selling homes, but you aren't in the business of selling them, you are in the business of building them. This is similar to automobile manufacturing, in which you have no choice but to build more cars, even if nobody wants them. The auto companies push these cars to the rental car companies, which mitigates the problem somewhat, but the home builders have not found an analogous path.
If you are a developer sitting on a partially finished development you can only hold off on finishing that development for a while due to the carrying costs. You can't sell the land because partially completed developments are difficult to sell in normal times, and right now nobody can get the loans to finance such a purchase anyway. As an example of this, consider that many of the banks that have failed in Georgia (which leads the nation in the number of failed institutions) during the crisis were brought down not by alt-a or sub-prime, but by loans to developers.
So, again, if you are sitting on all this land for the past year, and are being bled dry by the carrying costs, and can't sell the development as is, you choose to finish construction. The deflation in materials and labor costs enhances the attractiveness of this option. Furthermore, it used to be easier to sell properties in a finished development, because you could convince buyers that they needed to move quickly, or miss out on the opportunity to live in a desirable development.
Of course, this path leads to ruin, since the additional inventory only depresses home prices further. But again, from a home builder's perspective, there is no other option. It is either immediate bankruptcy or delayed bankruptcy.
There are 1.5 million foreclosed homes according to realtytrac.com:
RealtyTrac.com now provides a newly expanded list of over 1.5 million properties for sale. If any of these properties is also a foreclosure property listed on our site, we let you know so you can pinpoint the best foreclosure deals available.
There are many more that are being held off the market. And the next wave of foreclosures starts now.
And in other news, according to MarketWatch roughly 11.3 million homeowners are underwater on their mortgages.
Oh yeah, this just keeps getting better and better.
Good for a stock market rally.
It can't go to 700k (from 1,389k).
It can't go to 300k.
Sub 150k inside 24 months?
Half again?
Ultimate support at zero (0).
Chaos, bitches!
Today is the clearest illustration of Fed-induced Inflation occurring in the midst of a Deflating real economy, thus creating the perfect storm, the double-whammy that seals our economic fate: another great Depression.
The Fed's reflation policy via markets is creating inflation in energy, food, industrial commodities which in turn are depressing the economy and further eroding savings. Rates being kept at zero is adding gasoline to this fire. And the weakening of the dollar will inflate import costs.So today the stocks and commodities are higher despite the record low new home sales report.
But homes are deflating, lending is plunging, incomes are down (productivity up) and employment is grinding ever lower.
Any takers for where this will lead?
Prestidigiflation.
Indeflation.
wearefuckedeflation
Proper fucked?
Yes, before "Zee Germans" get there.
I'm sure I saw our destination when I was a kid. The road runner always outmaneuvered the coyote who then became a puff of dust at the bottom of the cliff.
And to really rub salt in it.... the homeless index is going up!
Jan 29, 2010 (M2 EQUITYBITES via COMTEX) --
Manufacturer of paperboards and consumer and corrugated packaging RockTenn disclosed on Thursday an increase in prices of corrugated box and corrugated sheets prices by 10% and 12%, respectively.
Keep in mind that those home sales figures (like all real estate stats) are derived from tiny samples, and are: 1) completely invalid--nothing more than guesses, and 2) fed to the sheeple from the real estate industry via the government, and massaged to appear as POSITIVE as possible!
The real state of home sales is beyond description, although nuclear winter comes to mind...
As a likely buyer in the 2012 time frame, I'm hoping that, by then, buying a place will be no more than an incidental expense.
There is a massive shadow inventory of homes held by banks. A story in my local market suggested that there was about 5:1 of homes in default verses homes that went into actual "courthouse steps" auction. The banks put the homes up for auction (this might even be a legal requirement, don't know) then pull them at the last minute so they don't have to realize the loss if the home sells for 10 cents on the dollar, as it would there being zero buyers right now.
So if we have 1.5MM acknowledged inventory right now, and 11.5MM underwater, I don't see how we have anything under 5MM shadow inventory within 2 years of now. And no end in sight even then.
I will probably walk away from my place before then. Just waiting for the winds to blow a certain direction. Don't know what we'll do... maybe pay cash for a small place in a quiet out-of-the-way place. I bet I'll be able to get a place for $50K all-cash by then in areas that used to run $700K. I'm not even joking, that's where it's headed.
NFS, I have been in RE for 30 years and I am not suprised at the number. Look we're back to basic affordability. No more fog a mirror and qualify. PRICES ARE COMING DOWN.
"fog a mirror and qualify"
hilarious
I'm stealing that one.
This just makes me think that the real time to buy won't be until 2015 or so...if you look at Japan, adjusted for inflation, the low in housing prices didn't hit Tokyo until almost 2000, ten years after the bubble in land prices peaked.
Timeline predictions being made on the back of Japans deflation experience are a big mistake... One needs to rememeber that Japans reflation efforts were/are collateralized by, for lack of a better word, a "healthy?" global economy fueled by endless cheap credit and its citizens vast savings...
Throw away the rule books and all historical measures because this time it really is different and not in a good way... Every nation, (directly or indirectly) is dependent upon anothers to fuel a domestic recovery... Globalisation like every new ideology, works better in 2 dimensions than in the un-quantifiable 3 dimensions+ of human experience...
Today, no nation is truely an island ;-)...
All charts and numbers are designed by the author to influence the reader.
BTW - "fog a mirror and qualify" ...classic must be on the Fannie Mae loan app.
The numbers don't suprise me at all. I'm an engineer working in land development (or more precisely, I was). Most of my former clients are now bankrupt. This includes some developers that are national companies traded on the NYSE. Those who aren't now bankrupt will be soon. Honestly, I don't know anyone in the business that is selling anything. At the current rate of absorbtion, new homes and subdivision lots in my area will take a decade or longer to clear. One of my clients is considering rezoning the future phases of his development to an agricultural classification so that he can grow hay as a cash crop. Anyone that thinks that we are in a recovery is smoking something.
My wife and I may be moving to Tucson from SoCal. One reason. You can rent a nice 1400 sq ft house on two acres for $800-1000 a month and buy one for $50-100k.
It helps if you like deserts. We do.
AZ has big financial problems too, but CA seems a gigantic train wreck about to happen.
build a rainwater catch system
And a 9 ft perimeter wall with razor wire on the top.
nice. sub 100K condos here we commmmeee!!
Time for DJIA 36000!
Is the housing stock still increasing? It can't be, can it?
Housing will have three legs down from the top. The first leg down was from the summer of '05 until the crash of March '09. There was that dead bounce from March '09 until Sept '09, and then the second leg down began. This leg will wrap within about a year and a half, roughly Sept '11; the market will lose another 20%-25% during that span. Then the third leg down, and the market will lose another 20%-25% from there. The market should bottom in Dec '12.
Of course, this is in real terms. Depending on the severity of inflation, nominally prices may stay up.
"housing stock still increasing"?
Report from small suburban community in Oregon:
At the top someone spent $1.3 miilion on 20 acres of land next to a nice regional golf course with about 20 condo/duplexs built next to it in the 90's.
The 20 acre developer got the roads in, the brick wall along the country road, the electronic gates and the promotional flags installed and there it sat for 12+ months with no action. Starting about 2 months ago there are now 3 McMansions going in. Problem is there are atleast 6-8 empty/for sale McMansions within 1 mile of this development.
WTF?! Somebody is anticipating a turn around that isn't going to materialize?
You build just because you haven't got anything better to do? And where did the financing come from?
We'll be at the bottom when these nitwits finally throw in the towel. Apparently they still have $ to lose - so no bottom yet.
Good Linux hosting option package offered by ucvhost which not only provides the best in terms of hosting packages but also believes in truly being there for the customer, 24x7. cheap vps Moreover , they offer unlimited bandwidth as well as nearly 1GB storage along with database maintenance, email facility along with storage, availability of sub domain and many other important features for a very low price. ucvhost thanks