The latest data on new home sales paints another grim picture of the U.S. real estate market. The pace of sales of new single family homes and condos fell to its slowest in 16-1/2 years in March. Inventory of unsold homes would take 11 months to work off at the current rate — that’s the biggest inventory glut in nearly 27 years.
Yet that seemingly ugly situation could be a signal that the worst is over for the new home market. Only twice previously in the history of the new homes sales data series has the months’ supply reading hit 11 months or higher — April 1980 and September 1981. Both those occasions marked a turning point for the market: Inventories of unsold homes plummeted as the sales pace soon improved.
(Ed’s note: This post was edited to alter an editor’s headline to stress that one reading of the data suggests the worst ‘may be’ over in the housing slump, instead of one lonely signal that the worst ‘is’ over.)
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10 comments so far
This is pure baloney! This is the propaganda you will be hearing right before the big spring selling season. House prices will be falling for at least 5 more years. Buy now and pay the price, brother!
- Posted by Stan TrexlerThe analysis provided is overly simplistic. It ignores three key points:
- Posted by marcus1) The magnitude of this housing bubble in which affordability was far lower than in past bubbles.
2) The sheer volume of forclosure which not sit in backlog while courts and banks try to dump these homes onto the market.
3) The absolute and unprecedented credit failures. Getting back into the market is simply not a choice as loans are not available for those who wish to buy at any price.
Looks good to me. I’m buying…now if i could only get a loan…..don’t always use a past as your guide to the future. We are in unchartered territory.
- Posted by JoshuaThere has also never been a run up in prices like we’ve seen over the past few years. The market will fall just as hard.
- Posted by ENothing else is the same as 1980 but all is far worse. Housing will collapse further and is already down 50% and more in large areas in California, Michigan, Florida, etc. Companies are lieing about their internal situations: Ambac, MBI, etc.
This is going to be far worse than most Fed, Treasury, and Bush people admit to. Nationwide there is an 11 month house supply and lenders are reducing loans they will accept while buyers reduce buying of many items including houses.
And now here comes the next wave of liar loans going belly up this year.
America is on its way to becoming a third world country very rapidly.
- Posted by BobHowever, does this take into account the glut of foreclosures that keep streaming in? Did 1980/81 have as many foreclosed properties as we do today?
- Posted by MarcusThis doesn’t seem to consider the issue of price. Sure, sales rate could increase, and drop the inventory, but if the prices are way down, then many will be ‘underwater’ and what do they do? Mail the keys to the bank and more appear on the market driving down prices. Sure, the sales rate is up, but the ‘bloodbath’ might be in the price not the rate of sale.
- Posted by Nic Fulconthe media have created this subprime rubish when 70% of all companies globally have returned profits like we have never seen before
- Posted by steveThe situation in 19801-81 was completely different.
Home price escalation then was nowhere near what it is today. At that time, interest rates spiked causing affordability to plummet. That situation was curable pretty much at any time at the discretion of the Fed, which controlled rates much more overtly than they do today. Once rates dropped (i.e. once the Fed was satisfied regarding other agendas), the housing market recovered.
Today, interest rates are barely relevant. The affordability problem is much more severe and became because of escalating prices. (A low mortgage rate doesn’t help affordability much if the amount of the mortgage is excessive because of an inflated price.) Neither the Fed, nor anyone else, can turn housing back on by flipping a switch, as was done in 1982. Supply and demand will need to come back into balance as fundamentals evolve.
- Posted by Marc GersteinAmerica continues to live in denial. The amount of media to depict their fragmentation of imaginary picture is futile as the public become more aware of their surrounding. A simple question, do one’s wages increase beyond 10% on yearly basis to substantiate the artificially inflated prices of property beyond the norm so that some broker and some financier can go for the kill. Last 8 years in America, we have witnessed that logic defies reality.
Look around you, everything from staple food to human needs are in the rise and dire straits except your wages, so how is it justifable that we continue to live in denial hoping that for the silver lining to bail us out purely based on our hope and believe that the administration is doing what is good for the public as oppose to the corporations that continuesly being bailed out for their own hidden agenda. Elementary, My dear Watson.
- Posted by Ravi Shan