New home sales plummet to record low

[Slimprofits]

http://money.cnn.com/2010/06/23/real...ew_home_sales/

New home sales declined 32.7% to a seasonally adjusted annual rate of 300,000 last month, down from an downwardly revised 446,000 in April, the Commerce Department reported Wednesday. Sales year-over-year fell 18.3%.

This is the slowest sales pace since the Commerce Department began tracking data in 1963. The prior record was set in September 1981, when new homes sold at an annual rate of 338,000.

[c1ue]

Re: New home sales plummet to record low

I am shocked! Shocked to find that subsidies affect housing prices!

[Slimprofits]

Re: New home sales plummet to record low

yes, it's hard to believe.

[bpr]

Re: New home sales plummet to record low

The prior record was set in September 1981, when new homes sold at an annual rate of 338,000.

The Prime Rate during that month was over 20%, and inflation was over 10% that year.

[ASH]

Re: New home sales plummet to record low

New home sales declined 32.7% to a seasonally adjusted annual rate of 300,000 last month, down from an downwardly revised 446,000 in April, the Commerce Department reported Wednesday. Sales year-over-year fell 18.3%.

This is the slowest sales pace since the Commerce Department began tracking data in 1963. The prior record was set in September 1981, when new homes sold at an annual rate of 338,000.

I've recently been tracking listings for 2006-2008 construction in my area, offered for short sale. I've visited five such properties recently. All were in good condition. In general, the short sale prices proposed for these properties were not pre-approved by the lender, so I don't know if the banks are actually accepting offers made at these price levels. I do know that the short sale prices proposed are about 10% lower than recent comparable sales in the same developments, and about 30% lower than what the homes originally sold for as brand new construction at the peak of the bubble. The other interesting fact is that the short sale prices proposed for most of these listings were knocked down by 5-7% in June.

[FRED]

Re: New home sales plummet to record low

The Prime Rate during that month was over 20%, and inflation was over 10% that year.

And the economy was 25% the size of today's economy: $3.5 trillion versus $14.6 trillion.

[Slimprofits]

Re: New home sales plummet to record low

The Prime Rate during that month was over 20%, and inflation was over 10% that year.

the population in 1981 was 229.5 million and now it's 307 million

[Rajiv]

Re: New home sales plummet to record low

Here is the graph for the last 47 years

[CanuckinTX]

Re: New home sales plummet to record low

It's very weird to hear that in CA my Sis-in-Law just put down a deposit on a house in newish development in Yorba Linda. The house was around $1.2m and she said that many houses in that area are still being snapped up very quickly. Of course they can't sell their 5 year old home in Brea for even what they paid for it back in 05. Their builder didn't start on the house until they put down some money though so they still have time to let the price fall and fall and fall.

[ASH]

Re: New home sales plummet to record low

It's very weird to hear that in CA my Sis-in-Law just put down a deposit on a house in newish development in Yorba Linda. The house was around $1.2m and she said that many houses in that area are still being snapped up very quickly. Of course they can't sell their 5 year old home in Brea for even what they paid for it back in 05. Their builder didn't start on the house until they put down some money though so they still have time to let the price fall and fall and fall.

The builder is still building new homes in one of the developments where a couple of the short sales I looked at are located. They recently started advertising lower prices to build new homes... maybe ~10% discounted relative to the base price. I see some new homes going up there, so someone must have bought... probably right around the expiration of the tax credit, judging by the stage of the construction. In fact, I see a lot of residential construction projects going on around town. If all the new homes I see being completed don't move, and they pile up on top of these short sales, that is going to affect the price of recent construction... "adversely".

[BiscayneSunrise]

Re: New home sales plummet to record low

I am shocked! Shocked to find that subsidies affect housing prices!

That was certainly true in the past but maybe not so much anymore. Subsidies sure helped people stretch a little further than they could afford but now it seems to me the main driver is the broken psychology around housing. No one says anymore "property can only go up" or "I think I'll but a place in a resort area to rent then use it myself in retirement" etc.

Government is trying to are prime the pump but the public just isn't buying it.

[Wild Style]

Re: New home sales plummet to record low

That was certainly true in the past but maybe not so much anymore. Subsidies sure helped people stretch a little further than they could afford but now it seems to me the main driver is the broken psychology around housing. No one says anymore "property can only go up" or "I think I'll but a place in a resort area to rent then use it myself in retirement" etc.

Government is trying to are prime the pump but the public just isn't buying it.

BiscayneSunrise,

I would amend your statement to read "no one with any sorta sense says anymore "property can only go up"..". I still encounter a ton of Joe Schmoes who tell me silly things like "oh I am just going to hold out for a few more years before I sell my house, I should be able to turn a profit by then. Or and this one is my favorite "in a few years things will turn around and prices will start going back up, they always do". It is said to say but outside of people on this forum the average guy/gal on the street is as clueless as ever.

[CanuckinTX]

Re: New home sales plummet to record low

Yes, I totally agree with your amendment Wild Style!

I know many people who think certain hard hit places have 'bottomed out' and now that you can buy a former $1m home for say $500k then it's a can't lose proposition. This mentality is what's driving a lot of sales in Vegas condos, Arizona rental properties, So Cal homes (see my post below about my own in-laws!) etc.

There is still a measure of pain to go if a lot of people are already jumping in assuming prices have bottomed.

Even in the case of my sis-in-law, if she has to hold on and rent out her current home for another 10-15 years she thinks that if it gets back up to say $1m (which it was apparently worth on paper a couple of years ago, now it's maybe $700k) and she's rented it the whole time then she has another home that's paid for! She doesn't really get that there is an opportunity cost of that equity which she doesn't get to pull out of her current home to lower her mortgage on the new home. Or that it's probably going to be inflation that drives the price back up to $1m, and in the meantime she's losing real wealth through that inflation.