New Home Sales Slide To 1/7th of Peak Rate in '05 As Foreclosures & Unemployment Soar

Discussion in 'Economics' started by ByLoSellHi, Feb 26, 2009.

  1. ...and median prices decreased the most in nearly 40 years.

    New-Home Sales in U.S. Plunge to Record-Low 309,000 (Update1)
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    By Courtney Schlisserman

    Feb. 26 (Bloomberg) --
    Sales of new homes in the U.S. plunged in January to a record low as soaring unemployment and mounting foreclosures drove buyers away.

    Purchases dropped 10 percent to an annual pace of 309,000, the lowest level since data began in 1963, the Commerce Department said today in Washington. The median price decreased 13.5 percent, the most in almost four decades.

    Even as they slash prices, builders are likely to keep losing customers as foreclosures drive down the value of existing homes further, making them comparatively more affordable. The Obama administration is making a priority of keeping more Americans in their homes to stem the collapse in property values at the root of the credit crisis.

    “There is a risk that you continue to see foreclosures and you continue to have new inventory added to the market that prolongs the adjustment process,” Zach Pandl, an economist at Nomura Securities International Inc. in New York, said before the report.

    Housing and Urban Development Secretary Shaun Donovan said today 6 million families in the U.S. may face foreclosure if policy makers don’t act faster to stem the housing decline.

    Stocks Rise

    Stocks rose, recouping yesterday’s losses, after President Barack Obama’s budget proposed as much as $750 billion in new aid for the financial industry. The Standard & Poor’s 500 Index rose 1 percent to 772.32 as of 10:15 a.m. in New York.

    Economists had forecast new-home sales would fall to a 324,000 pace last month from a previously reported 331,000, according to the median of 73 projections in a Bloomberg News survey. Estimates ranged from 291,000 to 350,000.

    Orders for long-lasting goods fell in January for a record sixth consecutive month, and the number of Americans claiming jobless benefits last week jumped to the highest level since 1982, other reports today showed.

    Bookings for durable goods dropped 5.2 percent, more than twice as much as projected, figures from the Commerce Department showed. The number of initial claims for unemployment insurance jumped to 667,000, and a record 5.1 million out-of-work people were receiving benefits, the Labor Department said.

    Median Price

    The median price of a new home decreased to $201,100, the lowest level since December 2003. Sales of new homes were down 48 percent from January 2008.

    Federal Reserve officials don’t see labor markets improving until 2011, after economic growth gains traction. Fed Chairman Ben S. Bernanke this week said the U.S. economy is in a “severe” contraction, and warned the recession may last into 2010 unless policy makers can stabilize the financial system.

    Treasury Secretary Timothy Geithner yesterday pledged to move quickly to address the financial crisis and said a tax break of as much as $8,000 for first-time homebuyers should help the housing market.

    “We remain committed to swift, efficient and effective implementation” of plans to help the economy, the financial system and the housing market, Geithner said in a statement.

    The number of new homes for sale at the end of the month fell 3.1 percent to 342,000. The supply of homes at the current sales rate surged to a record 13.3 months’ worth.

    The National Association of Realtors has said five-to-six months’ supply is consistent with a stable market.

    Housing Starts

    Builders began work on a record-low 466,000 houses at an annual pace last month as they tried to whittle inventories. That task has gotten more difficult as more and more foreclosures enter the market, putting pressure on builders to cut prices even more in order to compete.

    Foreclosures in the U.S. rose 17.8 percent in January from a year earlier, according to a report from RealtyTrac Inc. issued last week. A total of 274,399 properties got a default or auction notice or were seized by banks, the 10th straight month that foreclosures topped 250,000.

    Obama last week introduced a plan to help as many as 9 million people restructure their mortgages to avoid foreclosures. The Treasury Department last week also said it will double the amount of stock purchases of Fannie Mae and Freddie Mac to as much as $200 billion for each company.

    Regional Breakdown

    Sales of new houses decreased in three of four regions, led by a 28 percent plunge in the West. Purchases increased 13 percent in the Northeast.

    New home sales, which now make up less than 10 percent of the housing market, are considered a timelier indicator than existing sales because they are based on contract signings. Resales are compiled from closings and reflect contracts signed weeks or months earlier.

    The National Association of Realtors yesterday said sales of previously-owned homes fell to a 12-year low in January and the median price dropped 15 percent from a year earlier. The Realtors group said distressed properties accounted for about 45 percent of sales.

    Mounting foreclosures triggered a credit crisis which in turn has deepened the U.S. recession that began in December 2007. Economists surveyed by Bloomberg this month projected the economy will continue to contract at least through the first half of this year and that unemployment will rise to a 25-year high of 8.8 percent by the end of 2009.

    Residential investment has been a drag on the U.S. economy since the first quarter of 2006.

    Toll Brothers Inc., the largest U.S. luxury homebuilder, this month said its first-quarter revenue plunged 51 percent.

    “The past five months have been among the most difficult in U.S. economic history,” Chief Executive Officer Robert Toll said on a conference call Feb. 11. Homebuyers are worried they may lose their jobs and won’t be able to sell their existing homes, he said.

    To contact the reporter on this story: Courtney Schlisserman in Washington
  2. 2.1 million new homes (all builders, big and small, coast to coast, total) in 2006, and an annual pace of 309,000 in 2009.

    And both Mr. Tolls said it would go on forever and ever in 2006 (June).

    Cheeky monkeys.