Posted on 12/27/2006 10:46:40 AM PST by truth_seeker
WASHINGTON
Sales of new homes rose in November while the backlog of unsold homes fell for a fourth straight month, providing hope that the serious slump in housing could be ending. Sales of new single-family homes rose by 3.4 percent last month to a seasonally adjusted annual rate of 1.047 million units, reflecting solid sales increases in every region of the country except the South.
The increase was better than had been expected and offered hope that the steep slide in housing may be starting to bottom out as builders, using a wide array of incentives, begin to make a dent in the record level of unsold homes.
The 3.4 percent rebound in sales last month was the third increase in the past four months. It helped to lift the median price for a new home to $251,700, an increase of 3.2 percent from a year ago. The median price is the point where half the homes sold for more and half for less.
The housing industry has undergone a severe slowdown this year following a prolonged boom that had been fueled by the lowest mortgage rates in more than four decades.
This year's slump followed five years in which sales of both new and existing homes had set records.
What some are calling a recession in housing has been a big factor in the economy's overall slowdown, cutting 1.2 percentage points from growth in the July-September quarter, a period when the economy expanded at a lackluster pace of just 2 percent.
Many analysts believe housing is continuing to act as a drag on growth in the current quarter and will continue to depress activity through the early part of 2007.
The number of unsold homes fell by 1.4 percent in November to 545,000. It was the fourth straight decline in inventories after they had hit an all-time high of 573,000 units in July. Builders have been cutting prices and offering various incentives such as helping to cover closing costs in an effort to move finished homes and reduce high cancellation rates.
It would take 6.3 months to exhaust the current supply of homes at the November sales pace, down from 6.7 months in October and 7.2 months in July.
Sales last month increased in all parts of the country except the South, where they fell by 9.3 percent. Sales were up 22.5 percent in the Northeast, a rebound from a huge 35.5 percent drop in October. Sales rose by 22.4 percent in the Midwest and 19 percent in the West.
Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
A certain one-issue broken record doom and gloom poster will not find this amusing.
There are several leftist wacko shills making their livings trying to scare AMericans here...!
So now we're dumbed down to the point that we have to start including definitions of basic words in news stories?
A few interesting things in this article.
First:
“The number of unsold homes fell by 1.4 percent in November to 545,000.”
This includes the number of homes simply taken off the market by sellers who do not have to sell. Many of these sellers will put them back on the market next year because they WILL have to sell. It will be interesting to see if this is a blip or a sign we have hit bottom.
Second:
“Builders have been cutting prices and offering various incentives such as helping to cover closing costs in an effort to move finished homes and reduce high cancellation rates.”
This means they are, in effect, lowering prices to move the homes. There is no other way to interpret this.
Third:
“It would take 6.3 months to exhaust the current supply of homes at the November sales pace, down from 6.7 months in October and 7.2 months in July.“
This assumes that people who took their homes off the market do not have to put them back on, flooding it again.
I’ve said it before and I’ll say it again, come April I will either say “told you so” or I will eat crow.
"I’ve said it before and I’ll say it again, come April I will either say “told you so” or I will eat crow."
That just about exhausts your options doesn't it?
>>That just about exhausts your options doesn't it?<<
Yep. Intentionally so. Who was it that burned the ships after the men went ashore?
For the readers in Rio Linda, LOL (in Rush-speak.)
New houses in Rio Linda (just a few feet from 'Dry Creek') are down to the low 300s. Suckers.
I will know for sure really soon as my home in Portland maine goes on the Market next week...
Nope. These are new homes. Builders do not take new homes off the market.
This means they are, in effect, lowering prices to move the homes. There is no other way to interpret this.
Oddly, prices on new homes have gone up.
This assumes that people who took their homes off the market do not have to put them back on, flooding it again.
Again, builders do not take their homes off the market.
New home sales rose 3.4 percent from the previous month to a 1.047 million annual rate, above economists' forecasts for a 1.018 million rate, according to the Commerce Department. But sales were down 15.3 percent from a year earlier.
Shares of home builders were each up more than 1 percent in morning trading, with the overall Dow Jones Home Construction index (^DJUSHB - News) gaining 10 points, or 1.4 percent, to 729.58. This index has lost 21 percent this year, and is down about 35 percent from its high in July 2005.
"The new home sales report did beat the consensus forecast and that, I think, provides further evidence to support the view that the worst of the housing downturn may have passed," said Alex Beuzelin, senior market analyst with Ruesch International in Washington.
But talk of a bottom may be premature since the government data doesn't capture cancellation rates, said John Tomlinson, home building analyst with Majestic Research in New York. Majestic's own survey of 36 top markets has showed high rates of cancellation, he said, as buyers demand higher incentives before closing on a home.
Many home buyers are willing to walk away from their deposits to seek a better deal.
"It's a quiet week in the market," Tomlinson said. "On the surface, the data may seem somewhat positive, but you need to take a deeper dive into the metrics before concluding that we've reached a bottom and things are picking up."
Among major companies in the sector, KB Home (NYSE:KBH - News) rose 73 cents to $51.52, Toll Brothers Inc. (NYSE:TOL - News) gained 57 cents to $32.26, and D.R. Horton Inc. (NYSE:DHI - News) was up 25 cents to $26.36. Shares of Lennar Corp. (NYSE:LEN - News), Ryland Group (NYSE:RYL - News) and Meritage Homes (NYSE:MTH - News) were also higher, all on the New York Stock Exchange.
There is an instance where builders "take new homes off the market" and then put them back on.
It is called a "purchase contract cancellation" and it is happening with rather high frequency. Some builders are reporting back-outs on purchase contracts over 20%: Lennar, DR Horton -- both reported back-outs over 20% back in September. Actually, Lennar reported cancellations over 30%. We'll have new numbers when they report in the coming quarter. The historical average for cancellation rates is in the 15% to 20% range, BTW.
The effect of high cancellations of new home purchases is to overstate the new home sales rate and understate the unsold inventory numbers.
You cannot look at the Dep't of Commerce's "new home sales" numbers for this month and make any sense of it, because of the cancellation issue. The DOC (Census Bureau, actually) counts the sale when the contract is signed. They have NO mechanism for reporting back-outs on purchase contracts, and the don't re-count the house when it goes back on the market after the back-out. They count only the initial contract signing.
This is why the government's real estate stats are so widely at variance with the gloom being reported in the homebuilders' 10-K's and 10-Q's. To get a real sense of what is going on, look at mortgage originations, defaults, and the quarterly reports of the homebuilders. When you do look at these numbers, the picture is getting clearer all the time: high short-term interest rates, coupled with high leverage by house buyers, has taken the bloom off the real estate market in coastal regions. In the midwest, things are looking pretty stable. In places like Florida, San Diego, Vegas, etc -- things are looking pretty grim.
The government stats have become basically worthless, especially in the month they're released. The revisions correct them somewhat, but overall, the government stats simply aren't capturing reality any more. The market, ie, Adam Smith's "invisible hand" moves ever onward, and bureaucrats have refused to adapt.
A purchase agreement is not counted as a sale, so they are not overstating sales. Cancellations were high but are moving lower. Sales are up. Prices are up. Home Builders stock shot up over 2% today based on this news. Doom and gloomers are stretching to find any bad news here.
Fortunately, we're doing the work ourselves, and SirKit has gotten some great deals on some large ticket items like a new refrigerator, double convection/conventional ovens, gas cooktop, steam shower, and shower stalls for two new bathrooms. We're also going to put in concrete countertops and ceramic tile in the kitchen, and new cabinetry in both upstairs bathrooms.
Seems like a lot of stuff, but we've seen the competition, and since our house doesn't have the square footage that some do, we can make our square footage much more efficient and useful, and update the finishes so the house will look newer than it's 18 years. The best part is we won't be over-improving for the neighborhood, since our house was right in the middle of the prices on the street when it was built, and values have held up pretty well, since it's a great neighborhood! We chose well, when we bought it.
In central Illinois, I don't think there has been much appreciation in the last couple of years. It got hot for a couple years, then went back to sluggishly normal. Homes are still selling if they are priced right. Some people haven't received word that the market doesn't appreciate at 10% every year in our community.
It appears that purchase contracts are counted as sales:
http://www.bloomberg.com/apps/news?pid=20601039&sid=aFll0Y8wJuVQ&refer=columnist_baum
The Mortgage Bankers Association press releases also show lower mortgage initiations relative to previous quarters (but still up over last year), and increasing default rates.
The rate of increase of housing prices in the last two years is akin to the price of stocks in 1999. The source of the problem now is the same as it was in 1999: excess liquidity, thanks to the Fed. Greenspan himself said at the Jackson Hole conference in 2005 that the Fed policy is "increasingly driven by asset class pricing" and that's where the Fed is now. They're committed to take down the real estate prices, just as they were committed to take down the equity bubble of '99 and '00.
In late '99 through fall of 2000, the blindly optimistic were saying the exact same thing you're saying now: the people who were looking at the markets and saying "this is not sustainable" were called doomers and gloomers, piddling on the parade of progress. The venom directed at the people who wrote the seminal Barron's article exposing the unsustainable cash flows of Silly-Valley IPO companies was incredible. In the end, the fundamental analysis was correct.
Same deal here. I'm not a doom-n-gloomer. I just look at historical trends and fundamentals and can easily spot the part of charted data that indicates a variance with the long-established trend. Same deal in 1999: people were claiming that there was a "new economy" and "this time, it's different." There's never a "new economy" and human nature is never, ever different. I don't care whether we're talking about Pets.com, tulip bulbs or Florida condos. Humans are crippled with greed and greed drives markets to excess.
In the long run, the US real estate market is quite strong. "The long run," however, runs on an 18 year cycle.
I'm in Central Alabama, and there are a few new neighborhoods in my community where the homes haven't sold. Many of the houses (priced anywhere from $125,000 to $185,000) have been "sitting there" for more than a year. Within the past six months or so, most of these unsold houses have become rental property. I don't know much about new home construction (other than my own!) and buying trends, but I'm curious.
Do you know if that's an unusual practice? I believe that the leases are handled through a third party property management company.
LMAO
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