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The supply of unsold homes climbed to the highest in 16 years, the Commerce Department said in Washington today. Purchases dropped 3.9 percent to an annual pace of 848,000 last month. Economists had forecast they would rise to a 985,000 rate, based on the median forecast in a Bloomberg News survey.
``As ugly as these numbers are, they don't reflect the tightening of lending standards, which means sales are going to get worse,'' said Christopher Low, chief economist at FTN Financial in New York. ``The longer it takes for housing to recover, the more the risk it could spill over to other parts of the economy.''
Inventories of unsold homes rose 1.5% to 546,000, representing an 8.1-month supply, the largest inventory in relation to sales since January 1991, at the tail end of a recession. The inventory is up 27% in the past 12 months.
Inventories are probably understated, however, because they don't include homes thrown back on the market due to buyer cancellations
The number of completed but unsold homes rose to a record 179,000 in February from 177,000, up 43% from a year earlier.
"There is an enormous backlog of unsold new homes that have to be worked off before builders will start building spec homes," wrote Ray Stone, chief economist for Stone & McCarthy Research, in a research note.
Let's review the points made above.
1.) Sales are at the lowest level in 7 years
2.) Inventories are the highest they've been in 16 years -- at the tale end of a recession.
3.) Inventories are probably higher because of cancellations.
4.) Tighter lending standards -- which have been recently implemented -- aren't included in these numbers.,
5.) The number of completed and unsold homes is at a record.
None of this news points to a bottom in housing. We're not even close.