From Marketwatch:
U.S. new-home prices plunging at fastest pace in 36 years
The median sales price of a new home fell 9.7% in the 12 months ending in September, the fastest price decline in nearly 36 years, the government said Thursday. The government reported that sales of new homes unexpectedly rose 5.3% in September to a seasonally adjusted annual rate of 1.075 million, the most in three months and well above the 1.05 million expected by economists. New-home sales are down 14.2% in the past year. Inventories of unsold homes fell 1.9% to 557,000, representing a 6.4-month supply at the September sales pace. It’s the second consecutive decline in inventories. The inventory peaked at 7.2 months in July. Inventories are up 14.4% in the past year.
From Bloomberg:
U.S. September New-Home Sales Rise 5.3% to a 1.075 Million Pace
New-home sales in the U.S. unexpectedly rose for a second month in September as prices declined by the most since 1970.
Purchases increased 5.3 percent to an annual pace of 1.075 million during the month from a 1.021 million rate in August, the Commerce Department said today in Washington. The median price of a new home dropped 9.7 percent from a year earlier.
The reports suggests that builder incentives, lower mortgage rates, and falling prices will keep this year’s housing slowdown from deepening. It also signals the Federal Reserve, which kept interest rates unchanged for a third month yesterday, is successfully managing an economic slowdown that it hopes will stifle inflation.
“It does appear that the housing market is not freefalling,” Michael Gregory, senior economist at BMO Capital Markets in Toronto, said before the report. “Ultimately, lower prices and lower mortgage rates will begin to stabilize affordability.”
Economists’ surveyed by Bloomberg News forecast sales would decline to a 1.04 million rate from August’s originally reported 1.05 million pace. Forecasts ranged from 995,000 to 1.1 million.
The median price of a new home declined to $217,100 in September from $240,400 a year earlier, today’s report showed. It was the biggest decrease since an 11.2 percent year-over-year drop in December 1970, the Commerce Department said. The median price was the lowest since $211,600 in September 2004.
Inventories also declined. The number of homes for sale dropped to a seasonally adjusted 557,000 during the month, the lowest since March. The supply of homes at the current sales rate declined to 6.4 months’ worth from 6.8 months.
I wonder if they factored in all of the upgrades and free closing costs, how much prices would have actually dropped.
yikes. that’s a bigger hit than i expected. still it means little to us here in the NNJ area. new single family homes as a % of the market are statistically insignificant. now condos and townhouses might be another story, i don’t have the #’s but overall this is more bad news which should affect psychology further.
So, why should I buy somebody’s p*ss-smelling POS while painfully haggling over their laughable asking price when I can buy a brand new home for almost the same price.
These sellers need to let go of their fat, bloated pipe dreams and drop the price by 150K if they have any hopes of unloading their sentimental dumps.
prices are going to flatten to come down. my guess is we’re looking at a 5-7% haircut from today’s selling prices in the spring, then a flattening out for a bit.
Richard,
I don’t think anyone in their right mind will be buying from now to late spring. Possibility of a 10+% hair cut should be enough discouragement.
Even if it is a 5-7% hair cut, most 2004 ARMers will not be able to refinance. Wasn’t 2004 new home sales at record levels?
Even with 5% increase in sales, new home inventory went down by a paltry 1.9%!!!!
I like when I read about how the market won’t turn around until at least mid-2007, etc. Look at NJ (and national) history and it will show you that all declines/corrections last about 5-7 year cycles. There will be upticks and downticks, and it doesnt mean that house prices wont rise during that time – but they will be “normal” or nominal compared to the boom.
So if people are holding out for mid-07 they may be just as disappointed, and by then their ARMs will have gone up even more.
I’ll go with history and say the next big boom starts around 2011.
———————————-
This is a good time for investors!
http://reinewbie.blogspot.com
“I wonder if they factored in all of the upgrades and free closing costs, how much prices would have actually dropped.”
Yeah, and then factor in inflation… prices are likely down 15%+ easily.
My prediction:
It Seems like Home Builders:
1. Already got rid of all excess land.
2. Right now finishing up their projects and seelling new homes cheaper to unload invetory as fast as possible.
3. After they are done they will scale down their workforce by 50-70% and start working ont he smaller projects untill all it is all settled.
What does this mean for consumers: new homes right now are cheaper than existing 1920 cape cods (mostly the same but plug in warranties, new appliances and insentives).
There will be no grown in Economy from housing – anybody wants to argue with this pont??
Unemployment will be going up
With unemployment going up – wages will stagnate at best
Wages stagnate -puts even more pressure on the existing homes starting to affect banking and lending industries.
timeframe: – unloading of the new homes will be done by next September.
Unemployment will start creeping un starting next spring
winter 2007-2008 – start of the housing meltdown.
That is unless we have rampaging inflation – believe me I’d rather not have it – nothing destroys economy like High inflation – but hey wall street will be hit huge in that case, NY will be dirt cheap.
Al,
Good point about the sell-off of the new homes if they are competitive to new – affecting the inventory and pricing stats for the next year.
So the matrix of estimates I was thinking about creating a week back for duration, amount and dates of decrease/bottom date/increase/back to 2006 prices – should be tracked in the following categories:
New homes
Existing Homes
Condos
?% decline (from 2006) ending ?month/year
stagnant for ? years (start to end date)
increase to 2006 levels by ?month/date
Regions – NYC /North NJ / S NJ /LI ????
I can create a matrix and have everyone provide their estimates. Any other categories, and what should I use as the regions?
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