September 25, 2009
U.S. New Home Sales Climb On Discounts And Foreclosures
“Sales of new U.S. homes climbed in August to the highest level in almost a year as builders cut prices at a record pace to compete with the foreclosures that are flooding the market for previously owned houses.”
∙ New-Home Sales in U.S. Climb to Almost One-Year High [Bloomberg]
First Published: September 25, 2009 8:15 AM
Comments from "Plugged In" Readers
The only reason there was an "increse" from July to August was due to a downward revision in the initial July numbers. Also, a reported 0.7% increase within a confidence interval of 90% is meaningless.
Posted by: anon at September 25, 2009 10:24 AM
it would not be surprising for the YOY housing sales numbers to look better going forward.
last year was the midst of the crisis (not August so much but very much so Sept through Feb). we are past the feeling of armageddon that was prevalent a year ago. Thus, I suspect each year will have improved YOY numbers.
also: the first time homebuyer tax credit is really goosing the numbers as well. hard to do economic analysis when the government makes up such a large part of the market (Fannie, Freddie, FHA, Ginnie, homebuyer credit, overt purchases of MBS by the Fed, etc).
for a while I was astonished how willing our leaders were to follow the Japanese example, and then how willing they were to risk a currency crisis. but I lost that astonishment quite some time ago
the govt will do everthing in its power to blow a bubble. don't underestimate that.
it still remains to be seen if they can overcome the deflationary forces or not... and if they do if they can stop before we get hyperinflation.
on the face of things though, people seem to be feeling a little more secure the last 5-6 months or so. thus, the govt seems to be winning the confidence game. i'm not sure if that is a good or a bad thing.
Posted by: ex SF-er at September 25, 2009 10:39 AM
at what % increase or decrease ceases to be meaningless within a 90% confidence interval?
Important to know, so that appropriate data can be labelled as meaningless going forward, whether showing an increase or a decrease.
Seems to be one of the things on here that I've only ever seen increases labelled as statistically insignificant.
Posted by: REpornaddict at September 25, 2009 1:51 PM
The most remarkable comment in the linked report concerns prices:
"The median price of a new house fell 9.5 percent from the prior month, the biggest decrease since records began in 1963, as homes selling for less than $150,000 took a bigger share of the market. The median price decreased to $195,200, the lowest level since October 2003 and down 12 percent from August 2008. Sales of new homes were 3.4 percent lower than a year earlier."
The $8000 tax credit is plainly the primary factor and is goosing low-end sales significantly. $8000 free money NOW on a 30-year $195,000 buy at 5% is quite a handout. The amazing thing (as I've oft noted) is that prices continue to plummet even at the very low end which is where all the sales are. Mix factors certainly make up some of that, but not all of it -- the article even notes price-slashing. When the goosing ends (this year, next year, whenever), the declines will accelerate again, and any of these "bargain" buyers who now want or have to sell into the un-goosed market will be in for a shock.
Posted by: Trip at September 25, 2009 2:06 PM
New home sales make up 7.75% of the total market and are up .7%.
Existing home sales make up 92.24% of the total market and are down 2.7%.
Now which is more significant?
Posted by: J at September 25, 2009 2:30 PM
"New home sales make up 7.75% of the total market..."
I find this factoid interesting. New home sales should roughly track population, shouldn't it ? In other words, new homes are needed for new people (discounting the effect of replacing demolished homes which I'd expect is small).
Surely the USA population is not growing at 7%. So these new home sales increased by other factors : speculation, kids moving out into their own homes at an accelerated rate, seniors not returning to live with their kids, increased purchase of vacation homes, etc.
All of this must revert to the mean and eventually track population growth.
Posted by: The Milkshake of Despair at September 25, 2009 3:41 PM
^^^ Um, my bad : I misread the comment meaning that the 7.75% somehow was a percentage of population. It isn't.
I forgot to eat my wheaties this morrning. Sorry about the drivel.
Posted by: The Milkshake of Despair at September 25, 2009 3:53 PM
TMoD, you've blown my mind a bit, but I don't think you can make that leap. Take a small example -- 10 families in town in homes they bought long ago. One kid in town grows up, and a builder builds a new house for him that he buys with no other home sale that year. 100% of the "market" that year would be new homes, but that does not mean the town's population grew by 100%. Two different issues there. The pct of new homes in the overall sales market has more to do with existing home turnover than population growth.
Posted by: Trip at September 25, 2009 3:57 PM
This bubble started out modestly in the low end homes and took on a new life form as it pushed up valuation on the mid tier and eventually at the high end tier. It's unraveling in the same manner and clearly there are some spectacular failures but my hopes of a larger / faster crash in the high end are somewhat dashed. It's going to take many many years.
Posted by: eddy at September 25, 2009 4:23 PM
I think you're right on the history, eddy, but I would not count your hopes as dashed just yet. By my count, per redfin, we're now over the 12 months of supply measure (and growing) for the market slice above $1.5 million. That is based on the last 3 months sales (~20/month) in the denominator -- but that was peak sales season. With that supply/demand equation, price declines are "baked in" but the big unknown is how many of the sellers need to sell now (or in the near future). If it is a higher number due to recasts, unemployment, unwillingness to keep paying on an underwater home, whatever, the bottom will come faster. If it is a lower number, the decline will be more drawn out with the bottom years away. But the given at this point is there are far, far fewer buyers than sellers in this segment, and I see nothing that will change that any time soon.
Posted by: Trip at September 25, 2009 4:40 PM