Posted on 04/24/2008 7:31:16 AM PDT by central_va
New home sales plunge to lowest level in 16 1/2 years, with biggest price fall in 38 years
WASHINGTON (AP) -- Sales of new homes plunged in March to the lowest level in 16 1/2 years as housing slumped further at the start of the spring sales season. The median price of a new home in March compared to a year ago fell by the largest amount in nearly four decades.
The Commerce Department reported Thursday that sales of new homes dropped by 8.5 percent last month to a seasonally adjusted annual rate of 526,000 units, the slowest sales pace since October 1991.
The median price of a home sold in March dropped by 13.3 percent compared to March 2007, the biggest year-over-year price decline since a 14.6 percent plunge in July 1970.
The dismal news on new home sales followed earlier reports showing that sales of existing homes fell by 2 percent in March. Housing, which boomed for five years, has been in a prolonged slump for the past two years with sales and home prices falling at especially sharp rates in formerly boom areas of the country.
For March, sales were down in all regions of the country, dropping the most in the Northeast, a decline of 19.4 percent. Sales fell by 12.9 percent in the Midwest, 12.5 percent in the Midwest and 4.6 percent in the South.
In other economic news, orders to factories for big-ticket manufactured goods fell for a third straight month in March, the longest string of declines since the 2001 recession, while applications for unemployment benefits fell by 33,000 to 342,000
Rather than compare sales with 1992, compare housing inventory (unsold houses). You won’t like what you see. This will take a LONG time to work off.
As for the 'prolonged' slump, it's not anything new. The same thing happened in the late 80's. We had just bought our home in mid 1988 when the downturn began. It seemed like it was early in 1992 before the values started rising again. The drop in 1988 was proportional to the most recent one. We 'lost' about 20% off our purchase price in the previous slump, and this time, based on recent sales on our street, of homes that haven't been updated, the reduction in value is about 15%
“The use of a growing array of derivatives and the related application of more-sophisticated approaches to measuring and managing risk are key factors underpinning the greater resilience of our largest financial institutions.”~~Alan Greenspan, May 2005
"We're not about to go into a situation where (real estate) prices will go down. There is no evidence home prices are going to collapse."~~Alan Greenspan, May 21, 2006
“The damage from the subprime market has been largely contained. Fortunately, the financial system and the economy are strong enough to weather this storm.”~~Richard Fisher, Federal Reserve Bank of Dallas President, Apr 4, 2007
"All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system."~~Fed Chairman Ben Bernanke, May 17, 2007
I don't think we're headed into a recession. But there's no question we're in a slow down and that's why we acted with over $150 billion worth of pro-growth economic incentives, mainly money going into the hands of our consumers... The purpose is to encourage our consumers - to give 'em money - to help deal with the adverse effect of the decline in housing values.~~President George W. Bush, Feb 28, 2008
Still a long way to the bottom.
1992 was a dismal year for Real Estate. It was still falling from the effects of the Tax reform of 86, which changed the Real Estate market permanently.
That was a random malicious act of Congress.(McCain, Packwood, Benson and Bradley, a bipartisan screwing.) This is different.
-- begin transmission --
Thou shall not worry. Things are only bad in some financial markets and some pockets of U.S.. Stores are still packed. People buy new cars, despite rising oil price. Everybody is smiling.
Now don't challenge the Big Brother's infinite wisdom on economy. He is working in mysterious ways we cannot even fathom. Keep paying your debt and buying stocks.
Hail Golden Bull!
-- end of transmission --
Also, those sales numbers do not show the effect of shockingly high cancellation rates (due to financing falling through, etc.).
What an outstanding home buying opportunity.
Didn’t you get the memo?
There was No Bubble.
Talk like that only comes from Democrats, Doom & Gloomers, the Main Street Media, and other communists trying to sell you gold coins.
When RE prices are 2 1/2 times median incomes it will be close to the bottom. Unless there is overshoot, which after this bubble there may well be.
Times are so good that people are lining up to buy rice.
If you followed the history of long term busts and crashes, the buying opportunity is never just a few months after the peak when things have dropped some and folks like you are running around screaming buying opportunity. The real buying opportunity is when things have reverted to the mean, and folks like you have started deploring how bad the market is and what a terrible time to be in real estate. THAT is when their is non-speculative buying opportunity and always has been.
Right now, if you purchase you are speculating prices will not revert further to long term trends, which are WAY WAY below even current prices. It is purely speculative because there is no floor on this market. There is plenty of supply, little demand, and insufficient cash to liquidate most of the rapidly accumulating inventory.
That is not even close to true. That there was a genuine market bust as opposed to a temporary slow-down was not clear until after New Year 2008. It was only a couple of months ago that the NAR capitulated and admitted that there was a real problem. There are plenty of speculative developments being completed even now as we speak in DC. Large developments have lead times of years and enormous quantities of sunk costs. Failure to complete and you lose not 30% of your final expected sales price, but ALL of your money. Land with abandoned structures becomes almost worthless because of the cost of clearing the land and cleaning it up to make it suitable for some other purpose.
This housing 'crisis' wasn't nationwide. It seemed limited to certain regions; CA, Las Vegas, Detroit, the DC area, and especially FL. There were varying reasons for it. Some of it was just 'irrational exuberance', if you will, on the part of builders, realtors, and people who wanted to make a quick buck buying and selling real estate. Some of it was the subprime mortgage problem, though that affected much fewer people than most realize, and large urban areas with poorer residents, like Detroit and LA, tended to be affected by this. Some builders were hoping it would be short lived, and they wanted to keep their crews working, and have houses ready, in case it turned around. Another problem, and this was true mainly in FL, was the insurance situation. It became cost prohibitive to purchase homes, because the insurances costs had risen so much in the last couple of years.
There was no ONE cause to the housing problem, and even though folks like to complain about a 'bubble', after this slowdown, prices will pick up, and the cycle will begin, again. Those houses that were built will get sold, as they always have, because most people buy homes for their families to live in and enjoy, not just as investments. This housing 'crisis' has created an enormous opportunity for folks who wanted a larger home, or wanted their first home, but couldn't afford one a couple of years ago. With those homes coming down in price sometimes 20 or 30%, or more, in price, they are now in the range of families who were priced out of the market before.
I don’t scream; THIS IS SCREAMING!, and considered impolite on FR in most instances (rude even).
You seem to be assuming a great deal about me, based on a single sentence. My fault, doubtless, I didn’t write a thirty page document stipulating all the wherefores and therefores.
I don’t speculate (in the market sense). I buy to hold, and leave speculation to the really smart people, who can always catch the absolute bottom when they buy, and the absolute top when they sell (or think they can). Note I called it an excellent home buying opportunity, not a house buying opportunity. The difference is the difference between looking to find a bargain and looking to make a killing. But, you knew that.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.