Posted on 02/27/2006 11:39:57 AM PST by iPod Shuffle
Number of Unsold Homes Hits Record High
Monday February 27, 2:00 pm ET
By Martin Crutsinger, AP Economics Writer
Number of Unsold Homes Hits Record High in January, Shows That Market May Be Cooling
WASHINGTON (AP) -- The backlog of unsold new homes reached a record level last month, as sales slipped despite the warmest January in more than 100 years.
The Commerce Department reported Monday that sales of new single-family homes dropped by 5 percent to a seasonally adjusted annual rate of 1.233 million units last month.
That was the slowest pace since January 2005 and left the number of unsold homes at a record high of 528,000.
Analysts viewed the new data as further evidence that the nation's red-hot housing market, which hit record sales levels for five straight years, has definitely started to cool.
"The decline in new home sales in January makes it clear that there is some real softening in the housing market, said Joel Naroff, chief economist at Naroff Economic Advisors.
The 5 percent decline was bigger than expected, dashing hopes that the milder-than-normal January would help to bolster demand. The warm weather had pushed up the level of construction starts last month by 14.5 percent, the fastest rate in three decades.
But the new report showed that with sales lagging, the increase in building activity left a total of 528,000 new homes still for sale at the end of the month, a nine-year high.
Even with the softening in sales, prices were up in January with the median price climbing to $238,100, up 4 percent from December, but below the all-time high of $243,900 set in October.
For the past few years, home prices have been surging at double-digit rates, gains that analysts said will likely slow now that sales are softening and inventories of unsold-homes are rising.
Ian Shepherdson, chief U.S. economist at High Frequency Economics, predicted "real downward pressure on prices over the next few months."
David Seiders, chief economist at the National Association of Home Builders, said surveys showed that the number of builders who are throwing in various amenities for free in order to move homes has risen to 41 percent.
Seiders predicted that home price gains, which were running around 12 percent last year, will slow to about 6 percent this year.
He said a lot of this year's change will reflect less speculative investor activity and more sales spurred by people desiring to live in the homes. "Hopefully, that is all that is developing here," Seiders said.
Some economists are worried that with the inventory of unsold homes rising, there could be significant downward pressure on home prices, triggering a chain-reaction similar to the bursting of the stock market bubble in 2000, a development that contributed to the 2001 recession.
But new Federal Reserve Chairman Ben Bernanke told Congress earlier this month that for now he was looking for a moderate slowdown in the housing industry, not a crash.
The 5 percent January drop in sales followed a revised 3.8 percent increase in December and was the biggest setback since a 7 percent drop in November.
The biggest decline in sales was a 14.9 percent decrease in sales in the Northeast, which followed an even bigger 23 percent plunge in sales in December. Sales in the Midwest were down 10.8 percent after having risen by 21.2 percent in December.
In the South, sales fell by 10.3 percent in January, following a 1.2 percent gain in December.
Bucking the national trend, sales in the West posted an 11.3 percent increase in January after a 6.3 percent gain in December.
Mortgage rates have been rising gradually with the 30-year mortgage now at 6.26 percent, according to the latest Freddie Mac survey. Many analysts believe 30-year mortgages will rise to between 6.5 percent to 7 percent by the end of this year.
They think that increase will be enough to trim sales of both new and existing homes and slow the double-digit gains in prices seen in recent years. The National Association of Realtors reported earlier this month that a record 72 metropolitan areas saw double-digit gains in home prices in the final three months of 2005 compared with price levels at the end of 2004.
New home sales: http://www.census.gov/newhomesales
Cute cartoon. Oh and this is why myself and my darling wife are going to be looking hard a foreclosure in a few years to move up.
The sky is falling!
Call Gary North - he'll know what to do!
30,000 homes for sale in Maricopa/Pinal County Arizona, and more being built....some stalled....
I was staying at my buddies last week. 5 For Sale signs on his street, 4 on the next street, 6 on the street after that.
That is a healthy market for sure!
In North Korea there are probably no unsold homes.
ML/NJ
Seems like in the last few weeks lots of houses have hit the market here in Southern California.
Oh my. Now you got me scared.
I since the same thing. People who are on the bubble are ditching their homes. @ new signs went up on my street this weekend.
Drove by Toluca Lake Ca. Tons of open houses. I could not believe it. Went through three of them. All over one million dollars.
How does that work. Do you have to pay cash to buy?
Several ways, buy from the bank, or the home owner before he goes under, or from the sheriff's auction. The first two work almost like any other deal.
There are a lot of people who used hinky financing to buy more house then they could afford. Many will be in trouble in a few years.
I see plenty of Sheriff Sales in my area. Just curious, good luck!
There's a new condo development that recently went on the market... Silverlake area. 400k + for 1 and 2 bedroom units, and its immediate neighbor is a lube & oil biz! Old power lines/poles surround the new construction.
About a month after it opened, there were about 8 different for sale/lease signs at the front of the building. Obviously, 'investors' snapped up units while it was being developed, with the idea of immediately flipping, once construction was complete.
Many of those you can go to with a letter of proof of loan. Call the sheriff's office and find out the rules.
/sarcasm
"How does that work. Do you have to pay cash to buy?"
No, you don't. But, there are pitfalls to buying foreclosures, mostly related to owner neglect. Title insurance is a must, too.
Just curious but as the housing market grows wouldn't everything else along with it? More people own homes than ever before so it would stand to reason that more are on the market?
"More people own homes than ever before so it would stand to reason that more are on the market?"
You'd think so, but we shouldn't let logic get in the way of a good, scarey headline, lol.
That is like the $500k condos in Burbank. Village Walk is what they are called. Not too many of them sold. Olson Co. is the developer...they have some big stuff in Pasadena too.
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