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
GREAT NOW I CAN LOOK FOR A SECOND HOME ON THE WATER, LIFE IS GOOD FOR SOME THEY SAY
There's a long way to go to get to a real housing decline. In Houston in the early 80's, entire blocks would have every home for sale, many on the market for 4-5 years.
But despite that, they didn't radically go down in price. Maybe 10%. The fact is that mortgage holders won't pay someone to take their house (they'll walk away first). And lenders with forclosed homes won't sell for less than they have in it either, because they weren't looking to get their money back for 30 years in the first place, so a year or three isn't a big price to pay to avoid crashing the market and losing even that.
Yeah, prices won't go up this year. But you'll be waiting a long time to find a real steal. Even then it will be about the same price as you could have paid in June '05 and you'll think it's a great price.
Maricopa county real estate is forecast to increase in price 3.3% this year after last years 45% run up. There are a "normal" number of houses for sale in Fountain Hills where I am, after practically nothing for sale this time last year. And that's after plenty of new construction.
I'm curious is this is a seasonal drop that occurs every winter due to the weather.
I don't know how they figure to sell at 500k when you can rent the same condo for around $1500 a month. (check out Craigslist rental listings).
You are right, to an extent. What has changed is all the interest only loans and arms are going to cause IMHO a real drop in some market. I live in Pasaden TX, and I figure I will be able to pick up a house for about 90 to 95 cents on the dollar in a few years as arms go up forcing people either out or to seel for near what they owe.
We are moving to Dallas area in 2 years and my husband an I are going to do the same thing...looking for a foreclosure.
Seiders predicted that home price gains, which were running around 12 percent last year, will slow to about 6 percent this year.
Bucking the national trend, sales in the West posted an 11.3 percent increase in January after a 6.3 percent gain in December. "
Oh, the horrors, what'll we do, what'll we do!
Well, I live in Arizona too, and I have seen a lot more "for sale" signs up as well.
However, they are going down as fast as they go up. No house around here has remained unsold for more than a month. And every month is still setting new price appreciation records.
A "backlog" of 30,000 homes for sale is not far different from the number of families that will be moving to Arizona this year. I expect a slowdown in the rate of price increses, but no significant rollback.
-ccm
1,233,000 homes sold last month and 528,000 are not sold? Gee......that's a whole 13 days of inventory......look out below!
Lots of homes for sale here, few buyers.
1.2 million is an annual rate. The unsold inventory is about 5 1/2 months of supply - well within the normal range.
This article is garbage. Sales always drop from December to January. Weather, holidays etc etc. Note the article says: "Sales lowest since last January." Well, duh! The year to year sales are about the same and, oh my, prices are up. Yep, that equals a busting bubble. Not!
...and I hope to be at the forclosure auction buying 'alot of house' on the cheap.
Ahhh. Thanks for the clarification.
This is a deceptive statistic. Population is constantly growing. If the rate of unsold homes stayed exactly the same, there would be a constant increase in the "number of unsold homes" just due to increased population. Absolute numbers are meaningless. Rates are important.
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