U.S. home builders have slashed their prices by a record amount, but sales still plunged by 8.5% to a 17-year low in March, the Commerce Department estimated Thursday.
The decline in new-home sales to a seasonally adjusted annual rate of 526,000 was much weaker than the 577,000 pace expected by economists surveyed by MarketWatch. See Economic Calendar.
The report gives little hope that the housing market is near a bottom. February's sales pace was revised lower to 575,000 from 590,000.
New-home sales are down 36.6% compared with a year ago and are down 62% from the peak in July 2007.
The figures likely overstate the number of sales because they don't account for canceled sales, which have ballooned. The report is based on contracts signed, not sales closed.
Let's take this in a bit of a reverse order.
1.) These figures are likely overstated. That means we can probably expect downward revisions -- like we saw in February.
2.) Dealers are slashing prices (which probably doesn't include incentives) and yet sales are still down big. That means we have a massive inventory overhang.
For those of you who want a more in-depth explanation of why I think housing will be a wreck for the foreseeable future, go to this link. Here's the short version.
-- There's a boat load of inventory
-- All of the foreclosures we are seeing will simply add to that inventory.
-- Starting in 2010 and going through 2011 we have a second wave of resets
-- The US consumer is already in debt up to his eyeballs,
-- The US consumer hasn't seen an increase in real median home income since 2001, and
-- job growth id decreasing.
2 comments:
What do you think of this article which suggests high oil prices are being manipulated by criminals and terrorists to rob the US?
http://www.cnn.com/2008/CRIME/04/23/organized.crime.threats/index.html
On the topic of foreclosed homes: many of them may end up unsaleable at anything other than fire sale prices. Apparently one of the ugly things happening in the foreclosure process is that some angry mortgagees are gutting their homes of appliances, copper pipe and wiring. A coworker of my spouse has looked recently at foreclosed homes in our area, and saw several with holes in the drywall and floors, and missing appliances (many of the latter part of the price and options offered by the builder). These houses will probably only sell at prices reflecting pennies on the dollar, if ever. It won't surprise me if these newer developments don't become exurban slums and squats for years to come. This may have a deleterious effect on the housing market even after any recovery actually begins.
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