New home sales drop 8.4% in June
posted at 2:01 pm on July 25, 2012 by Ed Morrissey
Yesterday, I asked whether we have found a bottom in the housing markets. For at least today, the answer is … no. New housing sales dropped 8.4% in June, much steeper than analysts expected:
Sales of new single-family houses in June 2012 were at a seasonally adjusted annual rate of 350,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 8.4 percent (±12.4%)* below the revised May rate of 382,000, but is 15.1 percent (±16.7%)* above the June 2011 estimate of 304,000.
The median sales price of new houses sold in June 2012 was $232,600; the average sales price was $273,900. The seasonally adjusted estimate of new houses for sale at the end of June was 144,000. This represents a supply of 4.9 months at the current sales rate.
On first blush, the Mortgage Bankers Association report earlier this morning looked like good news, showing applications for mortgages on the rise. However, that came from an increased interest in refinancing. Applications for purchases fell last week:
The MBA’s seasonally adjusted index of refinancing applications rose 1.8 percent, while the gauge of loan requests for home purchases, a leading indicator of home sales, fell 2.8 percent.
The refinance share of total mortgage activity rose to 80.8 percent of applications from 80.1 percent the week before.
According to Market Watch, analysts expected an increase in purchases for new homes. Prices also fell again:
Economists polled by MarketWatch had forecast new home sales to rise to an annual rate of 375,000 last month. Sales in May were revised up to a seasonally adjusted 382,000 from an initial reading of 369,000 – the best month of sales since April 2010. The median price of new homes, meanwhile, fell 1.9% in June to $232,600, the lowest level since January.
Reuters rep0rts that the median price dropped in relation to a year ago, too:
New U.S. single-family home sales in June fell by the most in more than a year and prices resumed their downward trend, suggesting a set back for the budding housing market recovery. …
The housing market had been improving in recent months, with new home construction in June hitting its highest level since October 2008 and confidence among home builders this month touching its best level in more than 5 years.
Last month, the median price of a new home fell 3.2 percent from a year ago, adding to the report’s weak tenor.
In other words, we haven’t found a low — at least in the new-home market. However, this should be the last to recover. Foreclosure inventories dropped considerably until the settlement earlier in the year which allowed banks to push forward on foreclosures, short-sale inventories have probably declined (although I couldn’t find any hard data on that segment), so the easy deals will be mostly gone by the end of the year. The inventory level in new homes is one bright spot in the report. At the current slow rate of sales, it will only take 4.9 months to clear the backlog — up from May, but still pretty low, historically speaking.
The real problem right now is a lack of qualified buyers, as I wrote yesterday. We won’t solve that problem until we solve the high rate of joblessness and despair in the American economy, and we won’t solve that until we change policies to produce stable tax, regulatory, and monetary policies that allow investors to accurately price out risk for a 2-3 year period. Until that happens, the best we can do is find a bottom in the housing markets and bounce along it for an indefinite period.
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And rents, among other prices, have been skyrocketing all across the country.
No problem for those who live in government housing…like the Obama’s. But for the rest of us?
coldwarrior on July 25, 2012 at 2:06 PM
Almost every young family I know has either refinanced in the last year, or is trying to. With interest rates at artificially and stunningly low levels, it would be silly not to.
Mohonri on July 25, 2012 at 2:07 PM
I say this in every thread, but the market won’t hit rock bottom until the banks start releasing all of those foreclosures into the market and let the price reflect what people are willing to pay.
Everyone wants these properties to retain their “book value” so that they don’t have to report huge losses, hoping they can wait things out until the market is strong again.
teke184 on July 25, 2012 at 2:08 PM
Yeah, the wife and I refinanced a couple months ago(although our first payment doesn’t begin until Aug. 1). When we did refinance, Wells Fargo told us we were eligible to do it through the government refinancing plan even though we’re not even close to underwater on our mortgage. I even mentioned that to the loan rep on the phone several times, but she said we were qualified anyway and that the underwater provision really didn’t matter.
Long story less long, we took the lower government rate, but I think that’s pretty f’ed up that the feds are wasting money allowing people like me who aren’t the ones hurting to use this program and by all indications are encouraging the banks to promote it.
Doughboy on July 25, 2012 at 2:09 PM
If you qualify for a refi at a rate of 4% or lower, now’s the time to do it.
Considering that most investments are paying dick right now, you’re better served having a low-interest loan for a house than putting your money into the stock market or CDs.
teke184 on July 25, 2012 at 2:10 PM
The reason the Re-fis sky-rocketed was because of an Obama Administration Regulation involving Re-Fis for existing home owners who closed before June 2009 with an FHA conforming loan. From the way I understood it, the rule essentially allowed home owners in those loans to avoid paying some of the PMI in streamline refinances, allowing customers to re-finance for next to nothing. For example, before the rule, one might have paid $5-6K (at least) in closing costs to re-finance, but after the rule change, individuals might pay pay a $1.5K and at the same time drop your rate by 1.5 to 2 points.
Conservative in NOVA on July 25, 2012 at 2:10 PM
For the next 5 to 10 YEARS the answer is NO!
Hot Air needs to get past the “We don’t want to be seen as rooting for the economy to fail.” milk toast squishiness.
Get a clue, Ed.
We ARE in a DEPRESSION.
Every time you hedge your statements you give aid and comfort to the Most Corrupt Administration Ever.
Are you on their payroll?
No!?!
Then it is time to stop acting like you are!
PolAgnostic on July 25, 2012 at 2:11 PM
…JugEars:…My policies worked! That’s why I am running to be Present again!
KOOLAID2 on July 25, 2012 at 2:12 PM
I should add that June 12 (I think) was the date that this program started. So, everyone just stocked up for that date and a flood of re-finances went through at once.
Conservative in NOVA on July 25, 2012 at 2:12 PM
Unexpectedly!!
Bitter Clinger on July 25, 2012 at 2:15 PM
Uh, we did NOT get that kind of a deal and we closed originally back in April 2009. I guess we didn’t have a FHA conforming loan. I’m not gonna complain. We went from a 4.875% rate to 3% and shaved 12 years off our loan with the monthly payment going up by less than 200 bucks. But it sucks that some people are getting stuck with closing costs while others aren’t.
Doughboy on July 25, 2012 at 2:15 PM
“We tried our plan, and it worked!”
Just keep saying it until it sticks.
mankai on July 25, 2012 at 2:16 PM
Agreed. Even I know that the market is being artifically propped up by the banks. Until the foreclosed houses are actually put up for sale and until the banks continue getting through their backlog of foreclosures, we aren’t even close to the bottom.
MobileVideoEngineer on July 25, 2012 at 2:18 PM
Even refis are a huge hassle. Don’t expect to close in under 19 weeks. Onerous rules and regs are killing the entire industry. Had an acquaintance whose loan got yanked at the last minute because Netflix charged an auto-payment and it screwed up their credit.
RushBaby on July 25, 2012 at 2:18 PM
Lots of successful Americans want to give something back. For instance, every home that goes into foreclosure is a home that can be snapped-up by somebody else. All of this new homes sales stuff just muddies the water.
- Zero
OhEssYouCowboys on July 25, 2012 at 2:18 PM
Disappointing, but this is a month-to-month change, and they went back and revised May up. Year-on-year this is 15% better, which again indicates (per yesterday’s discussion) that the housing market may have bottomed. We know the Spring slowdown extended into June; no one expects much from tomorrow’s Durable Goods report (consensus: +0.6%) or Friday’s first look at 2Q12 GDP (consensus: +1.2%). Flash PMI this week showed manufacturing continued to slow in July, although less severely than in June … meanwhile, the Fed has their finger on the trigger for QE3 … will they pull it?
TouchdownBuddha on July 25, 2012 at 2:21 PM
Is that a real quote?
lorien1973 on July 25, 2012 at 2:22 PM
Mr. Knightley and I are getting mighty tired of crazy rent increases, so we’re going to try to buy our first home next summer. Unfortunately, we live in one of the few areas that’s insulated from the housing bust – there were no good deals to begin with, and this market is still (and apparently will always be) wildly overinflated.
mrsknightley on July 25, 2012 at 2:24 PM
Home sales numbers, no matter how weak or strong, are still heavily distorted by unsustainably low interest rates. Any gains will be more than wiped out by the inevitable increases that are right around the corner.
Bottom line – the real estate market is still in deep doodoo.
Common Sense Floridian on July 25, 2012 at 2:25 PM
My wife and I just closed on a re-fi yesterday. 2.875%, baby!! Even the closing agent did a double-take. I never considered actually paying off our house, but that’s exactly what we’re gonna do now!
stefanite on July 25, 2012 at 2:27 PM
No, I was mocking the Commie’s Costco stupidity, to wit:
OhEssYouCowboys on July 25, 2012 at 2:27 PM
That’s not true. Granted, there were hassles for us, but the whole process took just under 2 months. The biggest problem was being required to have someone come back out to do another survey on the house(which cost several hundred dollars). But that’s because we made an addition to the house after moving in. Had we not needed that, it’s conceivable the entire thing would’ve been done in 4-6 weeks.
Doughboy on July 25, 2012 at 2:27 PM
Unexpectedly!
Marcola on July 25, 2012 at 2:29 PM
FIFY
Marcola on July 25, 2012 at 2:30 PM
Agreed.
Heck, with the coming double digit inflation; having your presumable largest asset financed by a fixed rate of around 4% over 30 years is pracically free money.
Norwegian on July 25, 2012 at 2:31 PM
Big surprise, everything else is dropping as well.
To quote the President – “We’re moving in the right direction!”
GarandFan on July 25, 2012 at 2:37 PM
…”if you like your house”…you’ll HAVE TO KEEP your house!
KOOLAID2 on July 25, 2012 at 2:39 PM
Kind of like how the Employment-Population Ratio has bounced along at or below 58.7 for 34 months… almost 3 full years.
The last full month that Republicans controlled the House, Senate, and Presidency, December 2006, the Employment-Population Ratio was 63.4%.
For the whole of 2006, the BLS.gov data shows:
The Civilian noninstitutional population was 228,815,000.
The Number Employed in the Civilian labor force was 144,427,000
The Employment-Population Ratio, then was:
144,427,000 / 228,815,000 = 0.631 = 63.1%
Employment-Population Ratio was 63.1%.
The last full year that Republicans controlled the House, Senate, and Presidency, 2006, the Employment-Population Ratio was 63.1%, and the last full month that Republicans controlled the House, Senate, and Presidency, December 2006, the Employment-Population Ratio was 63.4%.
Then the Democrats took majority control of the House and Senate on January 3, 2007, and Democrats have held majority control (2+ out of 3 of the House, Senate, and Presidency) ever since. It’s been over five and a half years of majority Democrat control.
And for the first half of that (January 2007 to September 2009), they drove the economy into the ditch, while the second half of that (October 2009 to present) they have left the ecnomy in the ditch, as they prepare to dig the ditch even deeper!
The Bush Tax Cuts led to increased employment and INCREASED revenues to the Federal Goverment. The Obama Tax Hikes would do the opposite, and would lead to lower employment and LOWER revenues to the Federal Government. Why does Obama want even higher deficits than the record setting deficits he has already caused?
The BLS.gov data shows that the current Civilian noninstitutional population is 243,155,000.
If we had the same Employment-Population Ratio now that the repulicans averaged in 2006, namely 63.1%, the
Number Employed in the Civilian labor force would/should be
243,155,000 * 0.631 = 153,430,805
Whereas the ACTUAL Number Employed in the Civilian labor force in June 2012 was = 142,415,000
representing an Employment-Population Ratio, of:
142,415,000 / 243,155,000 = 0.5856 = 58.6% (rounding up)
So how many missing jobs are represented by that Obama level of employment (58.6%) as compared to the 2006 Republican level of employment (63.1%)?
153,430,805 – 142,415,000 = 11, 015, 805
Of course the housing market hasn’t recovered, when over 11 million more people should be employed, but aren’t because of the Democrats’ horrendous economic policies.
ITguy on July 25, 2012 at 2:41 PM
That is still a long time. Our mortgage broker says it take three weeks to do some pre-qualifying that used to take mere days before Congress decided to “fix” the home mortgage crisis.
Hubby asked should we refi again? (I think we’ve refinanced three times in the last few years.) I said, nope, we are still well below 4% on a 15 year and I just don’t want to go through the hassle again.
(The last time we refi’d, the first appraisal came in extremely low, even for a depressed market. We objected and sent comparables, so the bank sent a second appraiser. The second appraisal came in over what we determined [by recent neighborhood sales] was its current value, so we went with it. I don’t want to play that game again.)
Fallon on July 25, 2012 at 2:48 PM
Thanks to the failed policies and business-bashing actions of OBOZO and his dictatorial regime, the American economy is no longer on life support – it is stone cold dead. Rigor mortis has passed and the economy has now become just a decaying, stinking corpse. In spite of this, bailout bernanke, to justify his massive salary and humongous benefits, continues to provide mouth-to-mouth resuscitation to this rotting pile. All that is doing is creating asset and bond bubbles which help his Wall Street masters reap massive profits, but which also will inevitably collapse causing equally massive harm to the poor and middle class. Even with bailout bernanke’s desperate and potentially harmful actions, the labor force participation rate – the most significant measure of US employment – continues to decline and is now at nearly a 40 YEAR LOW, while “disability” claims and food stamp recipients are at an all time high.
If bailout bernanke and the feckless Fed really wanted to help the US economy (which they don’t – they just want BILLION DOLLAR profits for Big Banks and Wall Street), they would do what the rest of us must do: defeat OBOZO and elect Romney.
TeaPartyNation on July 25, 2012 at 2:49 PM
I’m in the industry, and can tell you that non-FHA refis have also picked up substantially in July.
Del Dolemonte on July 25, 2012 at 2:50 PM
That entirely depends on the goal. If the goal is to turn the US into the planet’s largest third-world nation then “Forward.”
Happy Nomad on July 25, 2012 at 2:53 PM
That was the longest part of the process was at the beginning. I had to do a couple of applications over the phone where they literally asked every question imaginable to determine my credit rating. Even a couple late payments on my Kohl’s account were flagged despite me never being late on a single credit card payment. After that there was a waiting period of 2-3 weeks where the processed everything and then we were finally able to move on to things like the new survey and then eventually close on the new loan.
I suppose it could’ve been streamlined, but nothing ever gets done more efficiently when the government gets involved. The good news is they lock in that government subsidized rate for a couple months, so you can afford to sit there and wait it out.
Doughboy on July 25, 2012 at 2:54 PM
Obviously we need another huge stimulus package…jeez, what’s wrong with you guys?/
Dr. ZhivBlago on July 25, 2012 at 3:04 PM
Homes will start selling at pre-bust levels once OBama starts building a few more bridges.
tom daschle concerned on July 25, 2012 at 3:07 PM
Given the way 2013 looks from here, would you buy or build a new house?
Didn’t think so…..
CorporatePiggy on July 25, 2012 at 3:11 PM
Good, all is working as planned.
hawkeye54 on July 25, 2012 at 3:17 PM
On a much more positive note..
sales of dachau’s outside of DC have skyrocketed.
The proliteriat never understand how important the Ruling elite are to their ongoing success.
acyl72 on July 25, 2012 at 3:21 PM
@CorporatePiggy – yes, because I want a fixed monthly payment instead of these damned rent increases every year. Then again, we don’t consider a home to be an asset – just a place to live.
mrsknightley on July 25, 2012 at 3:22 PM
A fair point given that rent is necessarily skyrocketing – I was thinking more about existing homeowners, most of whom sell to ‘upgrade’ or occasionally relocate. A lot of people are very leery of upgrading when looking down the barrel at what could easily be another very harsh crash in 2013.
As for the building of new homes, that’s still in the toilet but there is some activity building new multi-family dwellings. Not unexpected.
CorporatePiggy on July 25, 2012 at 3:40 PM
The policies that are dragging out these home construction numbers continue to add insult to injury. My idiot state (California) is about to double down on stupid with this crazy eminent domain mortgage scheme.
These people get so jazzed about a 350K nunber which is 25% of the yearly starts in the past, it kills me. These statistics have become meaningless in light of the manipulation taking place.
MikeinPRCA on July 25, 2012 at 3:41 PM
Have a sibling who is one of the top ten realtors in DC. Won’t touch a home valued at under a couple million. Only has to sell a few houses a year to live well. Has sold a big bunch over the past year. Those dachas she is selling have some nice features…built on chef’s quarters, outbuildings for “staff.” And she is a rabid Obama supporter, as well.
And they said I had deficient DNA.
coldwarrior on July 25, 2012 at 3:52 PM
Yep, that is is supremely bad news. (Pun about the current state of the Supreme Court unintended, but still true.)
I live outside DC and it seems like housing only ever goes up in $$$ around here. Ugh.
mrsknightley on July 25, 2012 at 3:56 PM
The other factor is that when the homes sell short it is typically well below current market, which in turn reduces comps, which in turn reduces sales prices generally. But you’re right; until the banks release the property and let the market find its own level there will be no real resolution.
UnrepentantCurmudgeon on July 25, 2012 at 4:34 PM
Yeah, those dang surveyors are always holding up everyone’s closings.
/
txsurveyor on July 25, 2012 at 5:22 PM
Add to that the inflation in car prices(Thanks C4C) and Americans are getting hit hard.
You’re the Bain of the building industry.
/
CW on July 25, 2012 at 6:09 PM
Where exactly is all this new housing?
J.E. Dyer on July 25, 2012 at 10:32 PM