New home sales soar to …
posted at 12:55 pm on July 26, 2010 by Ed Morrissey
New-home sales cratered in May, dropping 33% over the previous month to hit a rate not seen since 1963. The market had almost nowhere to go but up, and it did rise in June, jumping from an annual rate of 267,000 the previous month to 330,000 in June. That’s still the second-worst number in a year:
The Commerce Department says new home sales rose nearly 24 percent in June from a month earlier to a seasonally adjusted annual sales pace of 330,000. May’s number was revised downward to 267,000, the slowest pace on records dating back to 1963. Sales for April and March were also revised downward.
Commerce’s own release doesn’t make things sound very optimistic, either:
Sales of new single-family houses in June 2010 were at a seasonally adjusted annual rate of 330,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 23.6 percent (±15.3%) above the revised May rate of 267,000, but is 16.7 percent (±10.9%) below the June 2009 estimate of 396,000.
The median sales price of new houses sold in June 2010 was $213,400; the average sales price was $242,900. The seasonally adjusted estimate of new houses for sale at the end of June was 210,000. This represents a supply of 7.6 months at the current sales rate.
That inventory number is a little bit of good news. It had been as high as nine months at contemporaneous sales rates, which indicates that we may finally be working our way through the bubble.
The sales price data wasn’t nearly as good, however. A year ago, while we were in recession, those figures were $216,700 median and $270,900 average. Two years ago, it was $232,100 and $292,600, respectively. The closing gap between the two figures in June 2010 may indicate less artificial inflation in prices, but it also shows that home values continue to drop even in the new-home market.
And for that matter, so are sales, as the chart below shows, with data taken from the Commerce release (numbers shown in thousands):
The green star shows the expiration of the home buyer tax credit at the end of April. Note that the rate of sales in new homes had been declining since the end of last summer. The tax credit provided a short-term burst of demand in March and April of this year, which didn’t do anything but steal sales from May and June. We can draw a trend line between February and June that would show a direct connection to this latest sales figure. The gimmick has done nothing to solve the underlying problems in the housing markets, but did manage to introduce more uncertainty and instability.
Where else have we seen a chart of sales that looks like this? Oh, yeah.
Blowback
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First!
30 pcs of silver on July 26, 2010 at 1:00 PM
How . . . unexpected.
rbj on July 26, 2010 at 1:00 PM
Being a real estate broker in Southern Cal (dirtseller—get it?) I can unequivocally say that the only homes that are selling today are ones that can be described as “real good deals”. If you’re not being foreclosed on, and you’re not seriously underwater, you’re not on the market.
So sales may be going up but the sale prices will be cratering.
dirtseller on July 26, 2010 at 1:01 PM
Is there any data available on sales of existing homes?
30 pcs of silver on July 26, 2010 at 1:03 PM
“New” homes? Where are these? Wash DC maybe.
faraway on July 26, 2010 at 1:08 PM
And why was this not good?
If the price of gas goes down, it’s good.
If the price of food goes down it’s good.
If the price of electricity goes down it’s good.
Yet when the price of housing – the single most expensive thing most people buy – goes down, it’s bad?
Do explain.
angryed on July 26, 2010 at 1:14 PM
Also mortgage rates are at 50/60 year lows.
What happens when mortgage rates increase to 9% (30 year average)? Since most people qualify on the payment not the price. I expect to see further price drops.
Oil Can on July 26, 2010 at 1:17 PM
Yep, I bought this crap hook, line and sinker. On CBS radio news they played this off as a true turnaround in the market.
hawkdriver on July 26, 2010 at 1:18 PM
Liberal Math:
A 63,000 increase in sales…
right2bright on July 26, 2010 at 1:19 PM
Here we go again with the downward revision trick. This is the same thing that have been going on with the GDP numbers. The numbers are announced, then the numbers are quietly revised downward just in time for the lower revised number to be used as the baseline for the next month’s announcement of growth. Then repeat the process next month.
I’ll bet a dollar that the June numbers just announced are quietly revised downward just in time to use the lower number as the baseline for the big July announcement of sales increases…
forest on July 26, 2010 at 1:20 PM
Surely you jest…
right2bright on July 26, 2010 at 1:20 PM
Because for gas, food, and electricity when the price goes down the “other guy” gets it. When houses go down, for a lot of people the “other guy” is you.
pedestrian on July 26, 2010 at 1:21 PM
I think he meant it was bad news for the people under water already on their houses.
Johnnyreb on July 26, 2010 at 1:24 PM
Surely I don’t.
I need someone to explain why spending $1000 on a mortgage by buying a $200K house is worse than spending $2000 on a mortgage by buying the same house for $400K.
angryed on July 26, 2010 at 1:25 PM
Because the amount you owe is so much greater. Ratios don’t matter. Debt load is what matters.
keep the change on July 26, 2010 at 1:29 PM
Could be that the stuff you mentioned are consumables and not really an investment seen by the consumer.
Houses are not in that category for most individuals.
Electrongod on July 26, 2010 at 1:33 PM
That’s like saying the stock you bought for $5 is now worth $3, so it is now better…consumable products you want the price to drop (you listed, electricity, gas, food)…investment items you don’t want them to drop.
This is just one reason; to keep it very, very simple.
right2bright on July 26, 2010 at 1:34 PM
Houses are not consumable items. In fact, they usually get bigger and better as you renovate them. You can live in a house for 10 years, and not consume it simply because the value is mostly that of the land. Even if you eat the drywall and burn the lumber, the land is not being consumed. It remains.
keep the change on July 26, 2010 at 1:39 PM
Angryed, are you reselling your electricity, gas, and food?
faraway on July 26, 2010 at 1:43 PM
HUH? That makes no sense. Good lord and people wonder why this country is so effed up financially.
I asked a rhetorical question. Why is an expensive house better than a cheap house? The answer of course is “it isn’t”. But since so many people fell for the propaganda and bought more house they could afford on the assumption that values will go up forever, they’re screwed now.
But all else being equal, low house prices are better than house prices. Or put another way, spending $1000 on housing costs is better than spending $2000.
angryed on July 26, 2010 at 1:43 PM
Economic heaven would be; have the used car value go up, and the new value drop…
right2bright on July 26, 2010 at 1:45 PM
I did a skim of historical sales. The closest comparable period (Jan thru June) is 1982 and the 2010 period is worse than that:
1982 (first six months) — 2,200,000
2010 ” — 2,099,000
One aspect I haven’t completely considered is if difference in population between those periods this comparison not quite apples to apples. Should a comparison like this be adjusted the way purchasing power is adjusted for a historical constant dollar. If so, then using 1982 as the constant, new home sales in the first half of this year would adjusted to roughly (230M/309M) 0.74 x 2099 = 1,553,000.
A comparison of July ’81 to June ’82 (which seems to be the full lull) to this last year would probably make what we’re in now, look even uglier.
Dusty on July 26, 2010 at 1:45 PM
With all due respect to those out there seeking their piece of the American Dream, anyone who purchases a new home at this present time has wooley caterpillars rolling around in that empty space between their ears.
pilamaye on July 26, 2010 at 1:46 PM
The bad news is for those who bought the house at $2000, whose value is now $1000.
I might celebrate with you the end of the bubble and irrationally high home sale prices, supported by irrationally low interest rates, but because the government is backing all those bad loans, it’s not just bad news for the individual who made those poor economic choices,and the banks that joined them in that folly. Now we all get to pay for the correction.
TexasDan on July 26, 2010 at 1:50 PM
Simple, yes. Correct, no.
Housing is a consumable product just like food or gas or water. Whether through rent or a mortgage or imputed rent (look it up), we all pay for the good of housing. It has been drilled into people’s heads that paying $1000 is somehow worse than paying $2000.
I know I won’t win this one because anyone who “owns” a house thinks high prices are better. If you take yourself out of the equation and look at the numbers objectively you’ll see that as a consumer – and we are all consumers of housing – you’re better off with lower prices.
angryed on July 26, 2010 at 1:52 PM
No, it wasn’t a “rhetorical” question,it was an economic one, I even asked if you were kidding, and you said no, why is the price of housing dropping a problem
You confused consumables with investment.
Now you are embarrassed by being exposed as a simpleton, and you lash out at people who are educating you.
The proper thing to do would have been to thank us for educating you…but instead you post an even more foolish post.
Yeah, you are a real genius…hint; stay out of any kind of investing.
right2bright on July 26, 2010 at 1:52 PM
Do you really not understand why a house is not an investment if you live in it?
Let me guess you are a real estate
shillagent, yes?angryed on July 26, 2010 at 1:57 PM
No genius, we were answering your question…now you are changing the question.
You won’t win because you are being stupid and foolish.
When you ask a question, and are given a correct answer, don’t lash out if you don’t like it.
Here genius….most everyone buys a house as cheaply as they can…someone looking for a 200K will want it for 175, a person looking for a 2.5mil will be want to pay 2mil…it isn’t the “cheapest” it’s the best return on the dollar…it’s called investing.
Often people will buy the least expensive home on the block, knowing that the others will carry the price up over the years…
If I were you, I would stop posting about this…you are really painting yourself into a corner…quit while you are still behind, because next post you will be behinder….
right2bright on July 26, 2010 at 1:57 PM
Huntsville Alabama. BRAC is bringing thousands here. Its a military/NASA town, big Fed dollars here. So I see the many gov employees who have sh1tloads of money to spend. Within 1 mile of my neighborhood has to be at least 200-300 new homes in the last year.
The NASA hit didn’t look good, several hundred were laid off from the contractors arena. And military cuts won’t go over to well either. And cuts are coming.
Do we even have a national budget yet???
orbitalair on July 26, 2010 at 1:58 PM
Yep you’re a real estate
shillagent.Let me guess….if I don’t buy now I will priced out forever? LOL
angryed on July 26, 2010 at 1:59 PM
See, I told you, you are looking more and more stupid…no I am not a real estate agent…now don’t you look stupid.
I warned you genius…a house can be an investment and a home…it can function as both. Beyond your scope of investment knowledge, I know.
But that is all the investment knowledge I am going to give you…you keep asking and posing these questions to be taught, and I am not in the teaching mood. Not even a clever ploy to find out information, it’s been used many times before.
Pick up some good books and read them.
right2bright on July 26, 2010 at 2:03 PM
Right not so bright,
Do you also use the line with people that now is the best time to buy because interest rates are low? Or how about my favorite real estate salesman line “they’re not making any more land so prices will always go up”.
angryed on July 26, 2010 at 2:03 PM
Right no so bright, you are so transparent. You sound like you just got home for a 3 day real estate sales class, complete with all the cliches about investments and returns on the dollar.
angryed on July 26, 2010 at 2:05 PM
If you own the property, then it is not a consumable. The house is still there. Consumables disappear.
Can you quote an example of this drilling?
keep the change on July 26, 2010 at 2:08 PM
New homes aren’t being built, jobs not being created, what can possibly be wrong with those Americans who don’t know it’s their duty to work and pay for others free stuff.
Come to think of it, didn’t this happen to the Soviets as well? IIRC it was after the gulags were full and they had killed as many as they thought necessary, and still the Soviet people wouldn’t work.
tarpon on July 26, 2010 at 2:21 PM
The problem is, I don’t think it has bottomed yet. Just the math of the baby boomers wanting or needing to downsize, dictates that this one area will go on for another 2-3 years (as they retire). Until people and banks, realize that the property is not worth that much anymore…and the investment cycle begins again. But much slower.
We still have another round of mortgage (variables) due this year, and that will cause even more homes on the market driving the price down again.
Unless unemployment gets under control (back to 5%) home prices will continue like this for the next several years.
right2bright on July 26, 2010 at 2:22 PM
Ditto here in Indiana Lake Country…..All I’m selling is HUD’s and short-sales. This is not gonna be a short term thing, too much “uncertainty”.
Tim Zank on July 26, 2010 at 2:35 PM
Well, I want to buy a house — oops, hang on a second [pauses to knock woolly caterpillars out of ears] — so I hope you’re right, but here’s what I fear:
Obama administration bails out banks again by buying up all that shadow inventory, thereby keeping prices high
Obama administration rents out all those houses as Section 8s to reward their supporters.
End result: More government serfs, and even less opportunity for ordinary working Americans to buy a home they own.
This idea isn’t original with me — in fact, it may have been a commenter here who said it first — but it seems all too plausible to me, and it makes my blood boil.
What do you guys think?
Mary in LA on July 26, 2010 at 2:49 PM
No! Sales soared to 2nd worst since record keeping on the data.
Dasher on July 26, 2010 at 2:49 PM
Annualized New Home sales
1996 700,000
1998 800,000
2000 875,000
2002 900,000
2004 1,190,000
2006 1,300,000
2008 550,000
2010 330,000
Dasher on July 26, 2010 at 2:50 PM
buy a home
theyof their own.Sorry, one of those darn caterpillars fell on the keyboard.
Mary in LA on July 26, 2010 at 2:52 PM
You guys are the experts, but what I see is a huge bottle neck like in NYC and the north, looking to get out of large mortgages and downsizing, but no one is there to purchase what they own.
If they got rid of their mortgages, down her in NC, the real estate would go berserk. This is where they want to retire.
right2bright on July 26, 2010 at 2:53 PM
One of the developments near me is selling a home a day average, and the prices have gone up about 15% over last year.
We have, in my development about 9 homes being built, all in the price range of 400-800k range.
Some areas are dead, others are holding their own. Transfers from other states help.
right2bright on July 26, 2010 at 3:12 PM
I have to agree, since I was one of a dozen that posted that fear…Obama wanting or at least seeing an opportunity to lay the ground work for gov. control of pricing and housing.
right2bright on July 26, 2010 at 3:14 PM
here is some good charts to help understand the current housing data. In the areas that had the huge bubbles there is still a ways to go until prices have corrected to pre bubble prices. Good or bad(depending if you bought during the bubble) prices need to drop to corrected levels (before government interference sold houses to a bunch of people that couldn’t afford them) before we will come out of the housing
crisiscorrection. There is still a huge amount of hidden and delayed foreclosures that need to work through the system. The government is working with the banks to hide this inventory – which delays the correction and will keep us in this mess for years instead of letting it correct naturally and have a sharp pain but then allow it to heal.The ones who will get hurt the worst will be those the government “helps” followed by those that need to sell now. If you keep your home for another 10 years the price will (unless the government keeps trying to “help”) stabilize then appreciate normally.
Corsair on July 26, 2010 at 4:00 PM
Summer is the season where most of the homes get sold and June is suppose to be the best month. Can’t wait to see home sales number when school is back on.
jdun on July 26, 2010 at 5:08 PM
The only thing that’s becoming unexpected these days is why it’s always so unexpected to these chumps!
Pablo Snooze on July 26, 2010 at 5:53 PM
HEY! At least this administration has been CONSISTENT in it’s stupidity!
I’m waiting for a PUSH for new washers, dryers and refrigerators. Gonna get them factories humming and hiring again. You ‘betcha!
GarandFan on July 26, 2010 at 10:07 PM