Posted on 04/24/2010 5:58:46 PM PDT by blam
The Distressing Gap Between New Home Sales and Existing Home Sales
Calculated Risk
Apr. 24, 2010, 7:58 AM
First a comment on the seasonal adjustment ... on a Not Seasonally Adjusted (NSA) basis, the Census Bureau reported there were 38,000 new homes sold in March. That is up from 31,000 in March 2009.
Some (or all) of the increase was due to a one time event - the tax credit that expires in April. The Census Bureau doesn't know the number of homes sold due to the tax credit, so they report the Seasonally Adjusted Annual Rate (SAAR) assuming this is the underlying rate of sales. It isn't.
The April new home sales headline number will be distorted too, but the key is the actual underlying sales rate is much lower.
Note: remember the tax credit shows up in the new home sales numbers when the contract is signed (March and April), and in the existing home sales numbers when the transactions are closed (April through June).
[snip]
(Excerpt) Read more at businessinsider.com ...
The banks are still sitting on a pile of foreclosed houses and they aren’t going to let them go. I’ve heard this from two different Realtor / friends.
Maybe the new homes are located in places where housing is needed, and the foreclosed ones are located in areas where there is a surplus?
After all, a cheap house in Florida or Nevada is of little use to a guy who is looking for a place to live in North Dakota or Nebraska.
Crazy.
But then I won’t buy an existing home in which to live. I will only buy land and build.
Look up King World News on the web. They just had an expert on mortgage and RE investments describe the problem. The Obama coupon is distorting the sales numbers. He said that by end of June, the RE sales reported in July will drop by 15 percent. All the buyers that would have brought homes over 2010, most of them would have made their move NLT April 2010 due to the tax credits. That means from July onward, sales will dive because all the buyers for 2010, most of them would have already brought homes due to the tax credit. US gov may be tempted to continue the tax credits to prevent such drop in home sales data.
Homes are selling in Baltimore but the prices are down dramatically; am waiting to see when new homes flood the market this season, will they be matched by new buyers. I bet they won't but maybe it's my bias of wanting a cheap home.
Funny thing about building far more homes than you have people.
Eventually the bubble pops.
Real estate has a long way down yet to go.
Look at the average or median prices. They’re about half of what things were three years ago. Nothing but rock-bottom stuff is moving.
Housing-Market / US Housing
Apr 22, 2010 - 01:41 AM
By: Paul L Kasriel
In Wednesdays (April 21) NYT, David Leonhardt writes that rent ratios - the market price of a house divided by the annual rent of a comparable house - are suggesting that in many regions of the country, the purchase of a house makes more economic sense than renting a comparable house (In Sour Home Market, Buying Often Beats Renting).
According to Leonhardt, when the rent ratio is above 20, renting makes more economic sense. When the rent ratio is below 20, a home purchase makes more economic sense. "In many large metropolitan areas, including New York, Los Angeles, Chicago, Houston, Dallas, Atlanta and South Florida, the average ratio is now 16 or lower. It was more than 25 in several of these places at the peak of the bubble, about five years ago."
The National Association of Realtors calculates a Housing Affordability Index (HAI). This index is a function of the level of mortgage rates and the ratio of house prices to household income. The lower the level of mortgage rates and the lower the house price-income ratio, the more affordable is a home purchase (i.e., the higher is the value of the HAI).
The HAI index =100 when median family income qualifies for an 80% mortgage on a median priced existing single-family home. A rising index indicates more buyers can afford to enter market. Chart 1 shows the history of the HAI from January 1971 through February 2010. The highest reading for the HAI was 184 in January 2009. The February 2010 reading was 176. The HAI is sending a signal similar to the Leonhardt's rent ratio - owner-occupied housing is a buy.
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And that's not a bad thing. Remember every seller has to buy a replacement house, so inflated values are just a way for the municipalities and RE brokers to get 200-300% more money for doing the same amount of work. No one wants cars to triple in price just because they own a couple.
The outside is beautiful, the inside is horrid!
Thanks.
I see the gap as a better indicator though.
No every seller does not have to buy a replacement house.
There are more houses then there are people, and a seller does not have to replace a second, third, or fourth home.
We are ten years overbuilt. That is why you will find posts by me predicting this state of affairs dating back to 2007.
Have a free “I told you so”.
This is part of what is driving the push for amnesty to the illegals. If you look at McStain, you will see he was heavily financed by the construction and mortgage industries - who desperately need a larger population to buy all these homes for whom there are no unhoused people.
The speculators have largely left the market.
Stock-Markets / Financial Markets 2010
Apr 24, 2010 - 09:37 AM
By: Anthony Cherniawski
Compare the U.S. Census Report… “New orders for manufactured durable goods in March decreased $2.2 billion or 1.3 percent to $176.7 billion, the U.S. Census Bureau announced today. This decrease followed three consecutive monthly increases, including a 1.1 percent February increase. Excluding transportation, new orders increased 2.8 percent. Excluding defense, new orders decreased 1.2 percent.”
To the Bloomberg news article…“Orders for durable goods excluding transportation surged in March by the most since the recession began in December 2007, adding to evidence the U.S. recovery is broadening and strengthening.
The 2.8 percent increase in bookings for goods meant to last at least three years, excluding cars and aircraft, was four times larger than the median forecast of economists surveyed by Bloomberg News, figures from the Commerce Department showed today in Washington. Total orders unexpectedly dropped 1.3 percent, depressed by a 67 percent plunge in demand for commercial aircraft that is often volatile.” It’s all in the spin.
Dodd Bill Would Allow Fed To Hide Its Spending.
The Wall Street reform bill headed for a test vote on the Senate floor Monday night will allow the Federal Reserve to continue to pump trillions of dollars into major banks largely in secrecy, the co-author of House language that would open the central bank to an audit charged in a memo to the Senate. "The Senate has a provision in its reform bill that purports to audit the Fed. But, it really doesn't do anything of the sort. I'm going to run down the details for you, and reprint the legislative language so you can read it yourself," writes Rep. Alan Grayson (D-Fla.).
The incredible world of government interference.
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Fair enough. OK, the majority of people must replace a house they sell. I think my point is still valid in most cases.
I wonder if that house would pass a FHA appraisal?
There are not more homes that there are households.
There are more homes than all the households can afford.
House prices were priced as speculative investments, not as affordable homes.
House prices were way higher, double or triple, than their value as a home.
Numbers of inexpensive houses are held down by zoning and building codes which restrict the supply of small inexpensive houses .
There are not enough small inexpensive houses which young people or low income people could afford. Even “manufactured houses” or modulars are too expensive for many people — people who could afford at most a 10 year loan on a $40,000 furnished house and lot.
The prices aren’t half in my area. We had a drop in 2008 and 2009 of about 25-35%. We’re down 15-20% on prices currently.
In my county, we started with 3,000 homes on the market Jan 2008. We are currently at about 1700 houses on the market with a recent bump due to the people trying to take advantage of the tax credit.
This does not include the houses that banks are sitting on. I’m not sure where I would find that number.
I am in an area with tons of state workers due to the amount of universities and a nearby state capitol. That has likely helped our situation a lot. We’re also a medical center magnet for the state.
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