New Home Sales Plunge 33%
Sales of new homes fell 33% in May 2010.
With the expiration of the artificial government demand created by the tax cut left little doubt that new home construction is in for a challenging few quarters.
The caveat: This data series is notoriously noisy, and you are must better off using a 3 month moving average than read too much into any single month.
Highlights:
• Sales fell 32.7% below the April 2010 and were off 18.3% below the May 2009.
• Median sales price decreased 9.6% from May 2009 to $200,900.
• Purchases dropped in all four U.S. regions last month.
• A record 53% sales drop occurred in the West.
• Supply of homes jumped to 8.5 month’s worth, up from 5.8 months in April.
Note that May is usually an improved month versus April.
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New Home Sales May 2010, NSA
Chart courtesy of Calculated Risk
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Previously:
New Home Sales Data: Don’t rely On It Either (November 30th, 2005)
http://www.ritholtz.com/blog/2005/11/new-home-sales-data-dont-rely-on-it-either/
Home Builders Sell Signals (June 21, 2010)
http://www.ritholtz.com/blog/2010/06/home-builders-sell-signals/
Source:
NEW RESIDENTIAL SALES IN MAY 2010
Department of Commerce, Manufacturing and Construction Division
http://www.census.gov/const/newressales.pdf
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June 23rd, 2010 at 10:25 am
I believe Calculated Risk stated yesterday, that historically > 6 month supply coincides with falling prices, while < 6 month supply matches up with rising prices. All aboard for the dsicount express!!!
June 23rd, 2010 at 10:29 am
In Houston, new home contracts and closings are down over 40%.
http://blogs.chron.com/primeproperty/
June 23rd, 2010 at 10:37 am
What’s the over–under on home prices dropping by 20% or more between now and January ’11?
June 23rd, 2010 at 10:40 am
New homes fell 33% Glad my home is 3 years old… Thanks folks. I’ll be here all week. Try the veal.
June 23rd, 2010 at 10:51 am
“Supply of homes jumped to 8.5 month’s worth, up from 5.8 months in April.” New, existing or combined? Hard to believe that it is new because the volume construction that does not seem to be high enough to support that data.
June 23rd, 2010 at 10:58 am
where’s the review of the data by the Nat. Assoc. of Realtors? will this be the 1st time in living memory when Barry’s “buddies” from NAR can’t put any positive “spin” on the report?
June 23rd, 2010 at 10:59 am
Is this all “unexpected?” If so, unexpected by whom?
June 23rd, 2010 at 11:02 am
Positive spin:
New home sales decreased enough this month to ensure further government support of the market will be instituted in the near term. We do not anticipate supply and demand metrics for homebuilding to make much difference to our industry so long as we have the government by its short hairs, and because of the highly-leveraged nature of the enterprise (even though housing is less than 5% of the economy, it carries about 100% of concern amongst voters) there is very little chance that housing prices will be allowed to decline from these already depressed levels.
Lawrence Yun
June 23rd, 2010 at 11:05 am
Curmudgeon: Well played sir.
June 23rd, 2010 at 11:06 am
Oh, and I forgot:
“There’s never been a better time to buy”
Lawrence Yun
June 23rd, 2010 at 11:08 am
Actually, I think it’s:
“There’s never been a better time to buy or sell a house.”
June 23rd, 2010 at 11:15 am
Indeed, Pool Shark. Transactions are all that matter to the realtors.
My bad.
June 23rd, 2010 at 11:37 am
let’s see-
you buy a house w/ $8000 spiff from the USG-
spiff ends- house prices decline over the next year- conservatively- let’s say 10%-
home price when purchased= $300,000-
one year later = $270,000
a $30,000 hit- but I did get $8000 from the USG-
so by forgoing the tax incentive- and buying one year later- you saved $23,000
but somewhat irrelevent really- because most folks bought w/ 3.5% down FHA financing- monthly payment was all that mattered- and the $8000 from the USG after closing paid for their furniture
June 23rd, 2010 at 11:41 am
Secular trend in America is downsizing.
June 23rd, 2010 at 11:43 am
What a mess. Overbuilt, oversold, over-marketed, everyone who is going to make money in the housing and credit collapse has already done so, retired, and is sitting around smiling like the Cheshire cat, while the rest of us who are working for a living, and trying to raise a small, young family, can look forward to a future that is totally fucked.
But I’m sure things are all wonderful down in Crawford these days.
We will likely not see that kind of demand for housing for 25 years.
June 23rd, 2010 at 11:48 am
INMATES GET HOMEBUYER TAX CREDITS…
Freaking priceless…
http://www.cnbc.com/id/37870056
June 23rd, 2010 at 11:53 am
I don’t think prices are going to decline that much more, at least not here in SoCal. There are lot of speculators in the market now and they seem to be supporting prices esp. for resale homes/condos. Rents for homes and condos are going down and pushing down rents on appartments so there is a lot of demand for rentals esp with mortgages still fairly hard to get. All the strategic defaulters gotta go someplace. Rich people still have money to invest and real estate is a tangible asset, gold seems over priced.
I suspect there are less speculators outside the major urban areas, who wants to manage rentals or try to flip homes in geographically challenging areas, ero there may be further price declines outside the areas that have already had big contractions.
So, if that’s my insight how do I turn it into $$$$. I’m not really sure.
June 23rd, 2010 at 12:06 pm
Here in the SF Bay Area, many people are buying low priced condos and town houses with the intent to rent them out. Most of them have no idea what it means to be a landlord and are unprepared for the costs and aggravation.
This is not going to end well.
June 23rd, 2010 at 12:12 pm
“Rich people still have money to invest and real estate is a tangible asset”
It is, but to buy in a wave of declining prices is the same as simply giving your money away.
June 23rd, 2010 at 12:25 pm
And the higher end still has not come back down to earth here in the Twin Cities (and I’m guessing most other markets), as many million dollar+ homes sit on the market for months and years on end. I’ve never seen so many multi-million dollar homes for sales around Lake of the Isles in Minneapolis’ priciest neighborhood. This thing is going to drag on. We are turning Japanese. I really think so.
June 23rd, 2010 at 12:46 pm
No way Mann. Japanese are into personal savings.
June 23rd, 2010 at 12:52 pm
If you have been watching lumber prices, the new home thing came as no surprise.
http://quotes.ino.com/chart/?s=CME_LB.U10&v=d12
June 23rd, 2010 at 1:07 pm
@NoKidding: OK, worse than Japanese then.
June 23rd, 2010 at 1:12 pm
[...] home sales collapse. (Calculated Risk, Bespoke, Big Picture, Curious Capitalist, Atlantic Business, EconomPic [...]
June 23rd, 2010 at 1:24 pm
near term fundamentals just don’t matter for residential homebuilders as much as other stocks . . .ultimately, for the economy to recover, housing has to come back and the stocks are still very cheap . . .
With respect to recent data, it is very difficult to take anything from May seriously – the first month following the expiration of the tax credits messes everything up – then couple that with the severe pull back in the stock market in May and you get what we got (slightly disappointing results)
At 5.6M houses a year we are well below new household formations and teardowns . . .need a min of around 10+M (still a far cry from the peak but nearly 2x where we are at) . . in addition, the public guys have taken serious share from the private guys and a lot of this should be permanent (financing more difficult, land banks, scale) . .. I think foreclosures are going to be here for a while but the level will depend on where housing prices go (trend and absolute value) . . . not going to be pretty but priced in . . . with respect to pricing, if you look at a graph of historic price appreciation you will notice the big increase in pricing over the last few years followed by the contraction . .. however, if you extrapolate the growth trend prior to the boom out until today you see we are at the levels a normal progression would be ex-boom or maybe even slightly below (i.e., I don’t think pricing is still out of whack – housing affordability is at an all time high and starts for single and multi family are extremely low) . . oh well, what do I know . . .
June 23rd, 2010 at 1:33 pm
WRT Lumber one of things that I find frustrating is the time frame in which pricing is presented. I believe that broadly economic indicators are being ‘mis-benchmarked’ and that a longer time frame needs to be contemplated. The link below is a gov study on US timber production, etc which straddles 1965 to 2002. Some here may find it interesting.
http://permanent.access.gpo.gov/lps5730/1965-2002/fplrp615.pdf
Also, I noted in comments here last year (mar. 09) the case of a house being offered for sale in Charlottesville, Va and listed the sales prices 1997 to 2005. I persist in my belief that prices will move to remove the anomalies implicit in the price jumps from 2001 to 2005. Just use “Shifflett” as your search term.
June 23rd, 2010 at 1:49 pm
Anyone with two brain cells knew this would happen.
The government manipulation in the market didn’t create new home buyers it only affected when they purchase and what price they could pay. It is very logical that most home sales that would have happened in May got shifted to April and to a lesser degree for the next two months.
What a waste of money it was to shift sales from one month to another….
June 23rd, 2010 at 2:26 pm
[...] can take solace in one caveat: “This data series is notoriously noisy,” Barry Ritholtz writes at The Big Picture. “You are much better off using a three-month moving average than read too [...]
June 23rd, 2010 at 3:40 pm
Perhaps this is a stupid question but I don’t understand how this volume level is sustainable. We’re selling fewer homes than at any point since the 1960′s? The country is obviously larger and more dynamic than it was 50 years ago and people have to live somewhere. Is the argument that 60 to 75% of the home purchases in the past decade speculative and unnecessary bubble buys and we’re now just reaching the natural sales volume? The (albeit recent) historical data also does not show volume levels remaining this low for long periods of time. You’d think a volume increase would result in price stability…
June 23rd, 2010 at 4:00 pm
@decius stated
“…I don’t understand how this volume level is sustainable. We’re selling fewer homes than at any point since the 1960’s? The country is obviously larger and more dynamic than it was 50 years ago and people have to live somewhere…”
I think that is a salient point. There are a lot of people that have relegated themselves to living in less than optimal situations (i.e., moved in with relatives, cheap apartments, etc.). Eventually people will get tired of living with the in-laws and will seek something again of their own. It’s a similar argument to when people stopped buying cars, you can only do that for so long before you have to replace that broken down old thing.
The question isn’t if, but rather when people will re-enter the housing market. It may take quite some time. There are probably also a whole lot of people waiting for the bigger, better deal. Why buy now when you can wait it out? I’m just waiting for the silly reverse of this, the mentality that prices are going up again and we have to buy now, now, now, before they go up again. Got to love market mentality.
June 23rd, 2010 at 4:07 pm
One possible problem is that people on the edge of foreclosing are going to enter the process if their home values drop further, more homes on the market, further depressing prices….. causing more people to foreclose…..
June 23rd, 2010 at 7:26 pm
@jonpublic stated
“…people on the edge of foreclosing are going to enter the process if their home values drop further, more homes on the market, further depressing prices….. causing more people to foreclose…”
People don’t go into foreclosure because their hove values drop, unless they are trying to do a “strategic default”. People go into foreclosure because they can’t (or won’t) make payments. A drop in home values doesn’t change their payment amount.
If a lot of people are trying to game the system by trying to use the foreclosure process to get out of paying on underwater houses, then I think they will find themselves screwed over in time.
June 23rd, 2010 at 8:58 pm
Graph I’d Like to See
A pundit recently mentioned that the total US housing market at $16(?) trillion is larger than the total value of the US equities market at $14(?) trillion. Anyone have a link to a graph of that data plotted over the last 50 years or so? And compared to US GDP?
June 23rd, 2010 at 10:32 pm
I don’t get it… it’s like someone was handing out millions of dollars in free money to anyone who wanted to buy a house and then all of the sudden stopped.
June 23rd, 2010 at 11:20 pm
I make 50K a year and still can’t afford a mortgage on a one family house in NYC. I have co workers who make more and are renting rooms in drug infested hoods. Somethings still wrong with prices.
June 24th, 2010 at 12:12 pm
@mikaeel stated
“…Somethings still wrong with prices.”
A lot of this makes no sense. For example look at this list of sold properties. The lowest here sold at, and I’m not kidding $20,896 In 2004 it sold for $120,000 Looking at the list, this isn’t an aberration either. http://www.trulia.com/sold/85204_zip/price;a_sort/fs:1,s:1_pt/ My car cost more than that.
June 27th, 2010 at 6:44 am
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July 26th, 2010 at 2:09 pm
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