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that an improvement in sales in the second half of last year could falter as various government support programs are withdrawn.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.