New Home Sales: 7 Year Low
There was no good news whatsoever in today's New Home Sales Data:
• Sales of new-homes dropped nearly 4% in February.
• This is the lowest reading since June 2000, according to Commerce Department data.
• On a year-over-year basis, sales were down 18.3%.
• Inventories of unsold homes rose 1.5% to 546,000. This represents an 8.1-month supply. Marketwatch notes this is the largest inventory in relation to sales since January 1991.
• On a year-over-year basis, the inventory is up 26.6%.
• The median price rose 2.8% sequentially -- down 0.3% year-over-year basis, to $250,000.
This report is hard to reconcile with last week's Existing Home Sales; One of them is likely wrong, and I suspect the NAR prepared Existing Home Sales is the dud . . .
Monday, March 26, 2007 | 10:17 AM | Permalink
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>>I suspect the NAR one is a dud<<
BR-
Take into account how and where the numbers from the NAR report are taken from. I t also does not account for any cancellation activities. NAR=Head cheerleader for Realtors. How anything from them has ANY credibility left at this point is a mystery to me....are'nt we on the 8th or 9th month of a bottm according to them? LOL....
MS
Posted by: Michael Schumacher | Mar 26, 2007 10:26:29 AM
from marketwatch.com
"Sales of newly constructed U.S. housing unexpectedly slowed again "
Its funny how the make it out like its a big shock that housing is tanking. We have known this for quite some time now its no shock
Posted by: costa | Mar 26, 2007 10:32:24 AM
Marketwatch
there's an institution of integrity is ever there was one, ranks right up there with CNBC.
BTW any of you catch JDO on Friday??.made my year so far.....
MS
Posted by: Michael Schumacher | Mar 26, 2007 10:39:35 AM
Housing starts were up last week. Housing sales are down. Doesnt that mean the builders are still over building?
Posted by: GerryL | Mar 26, 2007 10:46:54 AM
Well, whadayaknow... some of the blogs that predicted the hard numbers would triumph over head-in-the-sand optimism may have been correct.
Duh.
Posted by: wally | Mar 26, 2007 10:50:10 AM
I put a few charts up at my blog. One shows the sales rate going back 17 years or so. Another shows the number of new homes for sale on the market going back as far as the data goes (1963).
The supply chart is simply astonishing -- we have about 130,000 more new homes on the market now than at any time in U.S. recorded history. Existing home supply is about 1 million units above any reading we've seen in the past 15+ years. The bottom line is we built way too many new homes to meet "false" demand -- demand from speculators. Now those speculators aren't just not buying, they're trying to sell. So it's no surprise the supply/demand picture stinks.
http://interestrateroundup.blogspot.com/
Posted by: Mike_in_FL | Mar 26, 2007 11:00:22 AM
and remember the mess in the subprime sector has started at the end of february..
so the first real impact will be seen in march.
Posted by: jmf | Mar 26, 2007 11:05:09 AM
This report is hard to reconcile with last week's Existing Home Sales; One of them is likely wrong, and I suspect the NAR prepared Existing Hom Sales is the dud...
No... the existing home sales report just trails the new home sales report substantially. Maybe by about 1.5 months or so.
Notice that new home sales went up for three months straight then "fell of a cliff".
Now existing home sales are up three months in a row. What happens next?
Posted by: super-anon | Mar 26, 2007 11:06:59 AM
And what does the Oracle of Housing Mr. David Lereah have to say today? LOL
Posted by: Jay Weinstein | Mar 26, 2007 11:07:32 AM
"And what does the Oracle of Housing Mr. David Lereah have to say today? LOL"
Let him huff some glue first before he comes out with his statement
Posted by: costa | Mar 26, 2007 11:09:47 AM
It's not that one of the housing reports is wrong, it's that existing home sales lags new home sales.
From census.gov: http://www.census.gov/const/www/existingvsnewsales.html
Existing home sales data are provided by the National Association of Realtors®. According to them, "the majority of transactions are reported when the sales contract is closed." Most transactions usually involve a mortgage which takes 30-60 days to close. Therefore an existing home sale (closing) most likely involves a sales contract that was signed a month or two prior.
Given the difference in definition, new home sales usually lead existing home sales regarding changes in the residential sales market by a month or two. For example, an existing home sale in January, was probably signed 30 to 45 days earlier which would have been in November or December. This is based on the usual time it takes to obtain and close a mortgage.
Posted by: Vdsat | Mar 26, 2007 11:14:42 AM
"We need you for a marketing campaign for the glut of condominiums in Florida!"
Rocky Lereah "Can't. I never use em"
Posted by: Ross | Mar 26, 2007 11:16:37 AM
hi mike,
the chart is really outstanding!
thanks!
Posted by: jmf | Mar 26, 2007 11:18:22 AM
The curious part to me is the .3% yty drop in the price of new homes...I'd have thought if I had a business with massive excess inventory, I'd cut prices to move it...apparently not so in new homes (accounting practices leading them down the road of delusion?). Meanwhile, their competitor - existing home sales - dropped prices 3% yty and the bottom doesn't appear to have dropped out for them. Guess home shoppers are going where the value is, the existing homeowner who dropped his price 3% (no big deal since he is probably sitting on a massive paper gain) instead of the new home builder who is holding out for pretty much last years price (WHY? ITS ECONOMICS SO SIMPLE A GEICO CAVEMAN COULD DO IT)
Lewis
Posted by: lewis | Mar 26, 2007 11:19:23 AM
"It's not that one of the housing reports is wrong, it's that existing home sales lags new home sales."
Yes, and this fits in with the idea that the mild December winter back east probably helped home sales. Whereas the west coast weather was about average and there wasn't the same increase. It's all coming together. yikes.
Posted by: Marc | Mar 26, 2007 11:21:46 AM
I can't help be think that the market is being set up to be rescued by whatever the fed has to say on tuesday, weds. AND Friday. Friday's "speech" could'nt have better timing for it is the end of the qtr. and Mr "inflation" speaks at midday about what.......you guessed it inflation, oh sorry PCE deflator.
http://www.cbot.com/cbot/calendar/event_detail/0,2411,EID+9669+3+15+2007+H+AR+FR+EU+,00.html
Anyone recall the fed bewing so prolific at the end of ANY qtr.? I can't I've been at this for a long time....pre 1990.
MS
Posted by: Michael Schumacher | Mar 26, 2007 11:27:59 AM
http://tinyurl.com/2nwq7a
Tuco: "Bondie... Bondie!... BONDIE!!, you know what you are, Bondie?... You'reeeeee aaa loooowwwww doowwwwwnnnnn dirty raatttteeeee is whaaaatt you aarrreeeeeee, Bondie!!!"
Bondie (lights a cigarette, rides off): "There's two kinds of people in this world, Tuco... those that believe rates are going up and those that dig... and you my friend, you dig."
Posted by: Eclectic | Mar 26, 2007 11:40:49 AM
New homes have been coming with more freebies over the past year. The builders don't like dropping the nominal price, but they are willing to throw in $50k-$100k worth of free upgrades. So if the nominal price has dropped at all, it means the actual price has dropped a lot (even before you account for inflation). I'm not sure how many more freebies the builders can throw in though. They might have to actually cut prices soon.
Posted by: jkw | Mar 26, 2007 12:04:50 PM
"this is the largest inventory in relation to sales since January 1991"
When the national economy was in...... RECESSION.
.
Posted by: VJ | Mar 26, 2007 12:22:32 PM
I will say this.
--
These comments are not directed to any builder, buyer, association, trade group or any individual. They are generalized comments about the reporting of real estate transaction prices (and other prices).
--
It seems to me that if a builder sells a house to a buyer, and if in order to make the sale the builder has to offer incentives such as pre-paying taxes or insurance for the buyer, or by offering anything of monetary value larger than a simple thankyou basket of inconsequential goodies... then, if that price posted and reported to various governmental authorities and/or associations doesn't reflect the costs of those incentives as a reduction of the true sales price, then that reported price is a fraudulent misrepresentation, and it would deserve all the same scrutiny that is being given liar loans.
Misrepresenting price levels of any good or service -- when the information about those prices, in the aggregrate, is so important to deserving people making informed and reasonable decisions -- is the height of fraud in my personal opinion.
If you sell a house for $250,000 and you have to give away incentives valued at $25,000 to do it, then you have sold the house for $225,000. Posting the sale at $250,000 is a misrepresentation.
It is true that for years auto manufacturers have competed as oligopolistic competitors, a form of economic competition in which prices are held steady and competitors compete on non-price attributes (freeing them to offer monetary incentives), however the effective competitive strategy of these companies is still no justification for misrepresenting the prices of automobiles reporting to either governmental authorities or trade group associations.
Misrepresentation is misrepresentation, regardless of how it is delivered.
I say make the vendors report the prices according to the true exchange prices paid. The negotiations are between them and their buyers (and I would not object to their manner of competition), but the prices they negotiate are misrepresentations if they're meerly pencil-whipped to conform to the price the vendor wants to defend.
Overstating the trade-in price of a vehicle being traded in is certainly something very difficult to evaluate as being a fraudulent overstatement of the new vehicle price, but the monetary present value of loan incentives or rebates used to induce the sales are clearly and easily itemized.
The only people who could object to this policy I've suggested are the mindless proponents of supply-side economics, who, as I have said here before, are largely responsible for this hocus-pocus pro-forma EBITDA fantasy world we live in today... in housing and otherwise.
Posted by: Eclectic | Mar 26, 2007 12:36:17 PM
From my note to clients on Friday Night 3/23/2007
Today's existing home sales figures were interpreted as bullish for the economy and I even read that some were pointing to this number as proof that the subprime loan problem has been "contained". While I will not predict as to the validity of the forecast contained in these articles, I will say that if they look at the details of the nature of the data collected in today's number, they / we will find a statement by the people collecting the data ( National Association of Realtors - no bias here, right?) that the monthly figures on home resales are compiled from contract closings and may reflect sales agreed upon weeks or months earlier. I would take that to mean, today's number has not seen any impact from the subprime loan fallout yet and due to the lag effect will need a few more months to see what that impact will be.
Posted by: Harley Evans | Mar 26, 2007 12:39:02 PM
the "real" median price decline are probably even lower than that. I think the supersizing McMansion crowd have been skewing things higher. (Bush's base of 1%-ers have been doing VERY well these last 4 years in particular)
Agree though, that the speculative ferver will probably works its' magic in reverse for some time.
Posted by: brion | Mar 26, 2007 12:43:34 PM
We may gain more insight into what the Fed sees as its #1 priority in the next few months: (a) Cut and it's the economy and/or the markets or (b) hold (or raise) and inflation and/or currency stability is #1. I'm inclined to believe it will be 'b' myself but choosing between a rock and hard place can't be easy for anyone.
The 64M question remains, how tough is the unwinding of this incredible, global credit expansion going to be?
Posted by: RW | Mar 26, 2007 12:57:55 PM
Hello there from Argentina - I'll try to give a view from someone who is a bit removed.
The NAR report is not necessarily a dud - remember that new sales in December also "surprised" on the upside. Used home sales announced Friday are really telling us what it was like in Dec / early Jan.
My take is that there were a lot of sales at the end of the year to invest money from sales earlier in the year before the tax relief was lost.
Posted by: Alejandro | Mar 26, 2007 1:00:20 PM
The data was bad, but the Margin of Error was worse.
http://www.themortgagereports.com/2007/03/three_housing_h.html
Posted by: Dan Green | Mar 26, 2007 1:24:27 PM
