The Associated Press reports that New home sales hit record low in January:
Sales of new homes plunged to a record low in January, underscoring the formidable challenges facing the housing industry as it tries to recover from the worst slump in decades.
The Commerce Department reported Wednesday that new home sales dropped 11.2 percent last month to a seasonally adjusted annual sales pace of 309,000 units, the lowest level on records going back nearly a half century. The big drop was a surprise to economists who had expected sales would rise about 5 percent over December’s pace.
While winter storms were partly to blame, home sales have fallen for three straight months despite sweeping government support. Economists were already worried that an improvement in sales in the second half of last year could falter as various government support programs are withdrawn.
SHTF Plan readers, unlike economic experts, are not surprised.
The real estate market is going to get worse – much worse. And while others may be surprised when real estate declines another 20% from here, we won’t be.
The next wave of the mortgage meltdown is coming when interest rates on adjustable rate mortgages begin to reset in a couple of months, all the way through mid-2011. Mortgage payments for an already broke consumer are going up, and many will not have the ability to service their mortgage debt.
For many homeowners who are making timely payments on their mortgages, mounting job losses will further contribute to delinquencies and defaults in the very near future.
On top of that, the US Dollar is going to lose value over the long-term, while those with the benefit of having a job will not see any wage increases to compensate for the depreciation of our currency. As those people shift more income to purchase higher-priced essential goods like food, gas and electricity, there will be even more fall out in the real estate market.
All signs point to another down-move in the real estate market.
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“While winter storms were partly to blame”
Yes, because we never have bad weather in January.   Calculated Risk has a great chart up just how bad this situation is:
http://3.bp.blogspot.com/_pMscxxELHEg/S4VA1T8-QPI/AAAAAAAAHmM/11z0ypQjjAY/s1600-h/NHSJan2010NSA.jpg
http://www.calculatedriskblog.com/2010/02/new-home-sales-fall-to-record-low-in.html
For the love of god….
How can anyone over the age of 5 be surprisd by this?
Real unemployment is pushing 20%, consumer credit is in a free-fall, consumer attitudes have changed, and those who might otherwise being willing to buy a new house right now know (or SHOULD know) that there is a TON of shadow inventory out there…not to mention the waves of foreclosures et al that are coming at us like a freight train…
All that crap points in one direction – DOWN.
I have been in Construction for thirty years as a manager, business owner, sub-contractor ,G.C. etc. If you want to work now you give the job away,( or “buy it) at 1/2 price then throw in the freebees and fix a bunch of shit for nothing because, the last guy couldn’t do job right for nothing. I am begining to get fed f@#$& in up. The lies and deceit from the gov’t are one thing , but business folks bitch and screw the next guy now,more than ever.ÂÂ
This is all adding to the debt bomb. Humanity is on the verge of being changed forever.
Nobody knows how this is all going to play out. NOBODY.
We are in uncharted territory.
Everyone should prepare for the worst while still praying for a miracle.
The “funniest” thing about this is that people only seem to think about this as a bad thing….
Yes, I do understand that new home construction is decent indicator of economic activity…and it gives people jobs, etc…
That being said, in a sense, there are too many houses as it is. That is one reason why prices are falling – simple supply vs. demand. So, in that sense, the fact that less new homes are being built is a good thing…as it will EVENTUALLY help stabilize prices.
Again, I know this means that there will be fewer construction jobs, but this is something we have to go through one way or another.
Rick- i think if yoiu took the number of homes available you could probably put a homeless family in everyone of them. ÂÂ
“As in the days of Noah” A man builds an ark for 120 years and no one clues in (except his family) why do we expect anything different now.ÂÂ
What everyone seems to miss about the real estate market; both residential and commercial are the demographics. The demographics may not have triggered the bust, but even I saw the writing on the wall of residential real estate ten years ago.
And then I got out of real estate after being a broker, CG Appraiser, developer and MB for twenty years. The party is over folks. Turnout the lights.
In addressing oversupply, Buffett said the economy reduced new housing starts to a number well below the rate of household formations.
“[This] means that within a year or so residential housing problems should largely be behind us, the exceptions being only high-value houses and those in certain localities where overbuilding was particularly egregious,” he said. “Prices will remain far below ‘bubble’ levels, of course, but for every seller (or lender) hurt by this there will be a buyer who benefits.
“Indeed, many families that couldn’t afford to buy an appropriate home a few years ago now find it well within their means because the bubble burst.”
http://www.marketwatch.com/story/buffett-calls-out-financial-leaders-2010-02-27?pagenumber=2