Don’t Let That Twitching Zombie Fool You, Housing’s Dead
The housing bubble story of the day has to be how the media initially fumbled the new home numbers. Business Week, “Let me get this straight: Mortgage and interest rates are on the rise. Household finances are also being pinched by record gasoline prices. Yet somehow, Americans have all of a sudden decided to go out and buy a whole slew of new homes?”
“That’s what a new government report released this morning would seem to suggest. But dig a little deeper, and you’ll see what’s really going on.”
“In February, for instance, the government reported that the median price of a new home sold was just under $240,000. At that price, homebuilders found that demand was diminishing. In fact, new-home sales plunged by 10.9 percent that month.”.
“So in March, homebuilders started slashing prices. The median sales price of a newly constructed property sold in March fell 7 percent down to $224,200. And since peaking at $243,900 in October, median sales prices on new houses have tumbled 8 percent.”
“What does this mean? While demand for new homes may be up, this is clearly turning into a buyer’s market. So if you’re in the market to purchase a new home, wait. If you show some patience, chances are home sellers will be putting their properties in the discount bin.”
Inman News wasn’t fooled. “The rate of new single-family home sales in March was about 7.2 percent below the March 2005 estimate, while the supply of for-sale inventory was up about 31 percent, the U.S. Census Bureau announced today.”
From the Federal Reserve. “Most Fed districts reported cooling residential real estate markets. Home price gains, when measured on a year-over-year basis, were lower than in previous periods.”
From Reuters. “U.S. mortgage applications slid to this year’s low as demand for loans to purchase homes fell last week to the lowest level since November 2003 despite a drop in interest rates, the Mortgage Bankers Association said on Wednesday.”
“‘Slumping mortgage demand, continued build-up in inventories and the fact that prices are now beginning to level off; all this adds up to the fact that turnover is going to fall and fall sharply,’ said (economist) Richard Iley. ‘House prices had been rising much faster than the level of mortgage rates. That’s now flipping around,’ Iley said. ‘That’s a big fundamental shift in the housing market and that has to affect people’s expectations and willingness to buy.’”
“The MBA also said refinancing applications declined last week. Its seasonally adjusted index of refinancing applications fell 2.4 percent to 1,489.4, from 1,526.1 the previous week. A year earlier the index was at 2,052.5.”
And then there is this quote. “Analysts suggested that inventories are at multiyear highs, and that’s a sure sign that the market is slowing on the demand side. At this point, the country could sell new and existing homes for five-and-a-half months without adding a single new ‘For Sale’ sign. That’s a level we haven’t seen in more than seven years.”
“‘New home sales sprang back to life like a vampire in a cheap horror flick,’ said economist Bob Brusca. ‘And like that zombie in the movies, housing really is dead. Don’t let all that twitching fool you.’”