In the wake of yesterday’s dismal existing home sales figures for January, we received awful new home sales figures today. The details can be found below …
* New home sales collapsed 10.2% to a seasonally adjusted annual rate of 309,000 from 344,000 in December. That was worse than the average forecast of economists surveyed by Bloomberg, who were looking for a reading of 324,000, and the worst level in U.S. history. The data goes back to 1963.
* The raw number of homes for sale continued to decline, falling by 3.1% to 342,000 from 353,000 in December. The months supply at current sales pace indicator of inventory ballooned, however, hitting 13.3. Tht was up from 12.2 in December and the highest reading ever.
* The median price of a new home dropped 9.9% to $201,100 from $223,200 in December. That was also a decline of 13.5% from $232,400 in the year-earlier period. New home prices are now at the lowest level since December 2003 ($196,000).
We got a real one-two punch of dismal housing data this month, with today’s new home sales report looking just as ugly as yesterday’s existing home sales release. Not only did the pace of sales fall to the lowest level since at least 1963, but a key measure of supply exploded to a record high. The raw supply of homes for sale is clearly dropping. But because sales are falling even faster, we’re not seeing any net improvement in the market. Result: Prices continue to fall, with new homes now going for the least in more than five years.
It really does all come down to jobs, jobs, and jobs. Lower mortgage rates are nice. Tax cuts are nice. But with the labor market deteriorating so sharply, we’re unlikely to see a meaningful improvement in the housing market. If anything, sales and pricing will deteriorate further.
{ 2 comments… read them below or add one }
Fortunately I stumbled onto the Money and Markets website recently. To your credit, your analysis is spot on.
History does repeat itself, however. What occurred in the lat 80’s with the Savings & Loan debacle, is happening at this time. There should be a mechanism set up like the RTC to dispose of these properties. In a way, the REO tapes are doing that.
Don’t you think a hedge fund to buy these products from the banks is the way to go.
I would guarantee you that the Fed will give this Fund the resources to step up to the plate.
I would appreaciate your views on this.
Mike ,
You state in this article that “New home sales collapsed to an Annually adjusted level of 309,000 MILLION units !!! Surely that ‘MILLION’ should not be there, since the raw units for sale were 342,000.
Was someone falling aslep at the typo ? regards, George