The latest new home sales figures came out a little while ago. No sugar-coating these numbers. they stink. More details:
* New home sales plunged 11.2% in January to a seasonally adjusted annual rate of 309,000 from an upwardly revised 348,000 in December. That was much worse than the 354,000 figure economists were expecting and below the previous record low sales rate of 329,000 a year ago. Data on new homes goes all the way back to 1963.
* The regional breakdown wasn’t anything to write home about, either. Sales fell 9.5% in the South, dropped 11.9% in the West, and plunged 35.1% in the Northeast. They inched up 2.1% in the Midwest.
* The supply of new homes for sale increased to 234,000 from 233,000 in December. That’s the first time in 32 months that the raw number of homes for sale increased. The sharp decline in sales drove the “months’ supply at current sales pace” indicator of inventory to 9.1 from 8. That’s the highest reading since last May (9.5).
* The median price of a new home fell 5.6% to $203,500 from $215,600 in December. On a year-over-year basis, prices fell 2.4%. Home prices are now the lowest since December 2003.
So much for the trend of decent housing news! January’s new home sales figures were awful across the board. Fewer new homes were sold in this country than at any time since the Kennedy administration. The inventory of homes for sale increased, and the median price of a new home fell to its lowest level in more than six years.
What the heck happened? For one thing, the new home builders are getting their clock cleaned by the existing home market. Distressed inventory continues to hit the market at cut-rate prices, drawing potential buyers away from new product. For another, we’re still dealing with a tax credit “hangover” effect. And let’s face it, the job market is nothing to write home about, either. I still think we’re on the long, slow road to an anemic, lackluster recovery in housing. But numbers like these can sure shake your faith.
{ 2 comments… read them below or add one }
Hello Mike,
Does this change your view of Long Term Treasurys? (and thus interest rates). Do you still feel that the 30 year treasury bond market is headed lower for price and higher for yields?
Thanks
Andrew
Mike Larson Reply:
February 24th, 2010 at 1:34 PM
No, it does not. I still expect lower long-term bond prices and higher yields. Traditionally bonds trade in tandem with economic and inflation data. But that dynamic is changing. Now, supply concerns and sovereign credit concerns are TRUMPING the economic data.
Consider this: In countries like Portugal, Greece, Ireland, etc. the economic data is awful. Multi-quarter recessions are the norm, unemployment is through the roof, and there’s little inflation — or outright deflation — showing up in the statistics. Yet rates are rising and bond prices are falling anyway. That shows that the key drivers of bond market action are debts, deficits, and bond supply! As a matter of fact, after rising earlier today, bond prices are now down slightly because … surprise, surprise … the 5-year Treasury auction went poorly. In my opinion, if you’re trading bonds, you should be aware of this shifting dynamic. Hope that helps!
Mike,
I’m in the mortgage business. I think what most people are missing is that there is a huger ’shadow’ inventory of homes that are bank owned and not on the market. They have been keeping them off the market in order not to demolish what market there is. They are asking people who have been foreclosed on to stay in their homes for at least another year ‘after’ the foreclosure. Many banks aren’t even starting the foreclosure process on delinquent loans. I know of one person who stopped paying over a year ago and hasn’t even heard from the bank. There is also an incredible number of homes trying to sell on a ’short sale’. Banks are so far behind (deliberately?) on short sale responses it’s taking 6-8 months to get an answer to purchasers. Not to mention all the OPTION ARMS that are resetting in 2010 and 2011 and all the good loans now going bad because of job loss, etc. I don’t think the official statistics even begin to tell the story of how bad it is. In my opinion we’re in for a long, long period of a very bad real estate market.