New Home Sales Crashing

[unlawflcombatnt]

Today's New Home Sales report was much lower than predicted. February's annualized New Home Sales rate was only 848,000/year. This is a decline of -18.3% since February 2006. This is a -38% decline from the peak in July 2005. February's numbers were also 15% lower than the 1 million rate predicted by the market experts (propagandists). February's New Home Sales marks a 10% 1-month decline from the originally published January sales of 937,000.

The previous 3 months' numbers (November, December, and January) were all revised downward significantly. These changes can be seen in the modified table from Briefing.com shown below. The top half shows the actual February numbers for 3/26/07, along with the new, downwardly revised numbers for November 2006 through January 2007. (The revised numbers are underlined in red.) The bottom chart shows the predicted and previously published numbers as of Sunday, March 25th.



As can be seen from above, New Home Prices are down -0.3% for the year. Median prices for Existing Homes are down -1.3% since February 2006. (So much for the fairy tale that home prices never decline.)

Unsold New Home Inventories rose to 8.1 months-worth. This is the highest level in 16 years. This is a 27% increase from February 2006. The total number of New Homes for sale on the market was 546,000 at the end of February. Adding this number to the 3.748 million Existing Homes for Sale at the end of February gives a total number of homes for sale of 4.294 million. This is a 22% increase in total inventory of homes for sale since February 2006. (The "months-worth" of unsold inventory is higher because it takes into account the number of homes sold, which declined since February 2006)

Below is a copy of Table 2 from the Census Bureau showing the latest New Home Sales statistics. Note that the the year-to-date sales for 2007 are only 136,000 homes, compared to 177,000 at this time last year. This is a 23% decline from for New Home Sales in the first 2 months of 2007, vs. the first 2 months of 2006. (Key numbers are underlined in red.)



The longer term trend on New Home Sales can better be seen from the chart below from Briefing.com.



It's difficult to see how anyone could say that the housing crash is "bottoming out." In reality, it looks like it's crashing at a fairly consistent (and rapid) rate. In fact, today's numbers actually indicate that the crash is accelerating.

Isn't it nice to know that the subprime problem isn't "spilling over" into the prime market, or the housing market as a whole? The self-proclaimed market experts have sure called this one right, haven't they.

unlawflcombatnt

Economic Populist Forum

EconomicPopulistCommentary

___________
The economy needs balance between the "means of production" & "means of consumption."

[unlawflcombatnt]

1. Foreclosure Rate up 33% in 2007

The foreclosure rate has risen considerably since the beginning of 2007. January's 136,116 foreclosures was the highest monthly number ever recorded by RealtyTrac. February's foreclosures declined slightly to 130,786. However, this was the 1st time 2 consecutive months had over 130,000 foreclosures. Based on January & February, the annualized foreclosure rate for 2007 was 1.6 million, much greater than 2006's foreclosure number of roughly 1.2 million. The Businessweek article discussing this can be found at: http://www.businessweek.com/bwdaily/dnflash/content/mar2007/db20070326_901985.htm?campaign_id=rss_daily

[KingBob]

2. Lack of New Home Sales

I know of five parishes in Louisiana and three counties in Mississippi that would love to contribute to the new housing market. The really big HOWEVER is the snail's pace of recovery money going into rebuilding not just New Orleans and Orleans Parish, but also St. Bernard, Plaqemines, and Jefferson Parishes of Louisiana and Hancock, Harrison, and Jackson Counties in Mississippi. It has now been nineteen months since Hurricane Katrina and our great leader, who said he would be around until it was all fixed or some such nonsense, has been, at best, less than truthful and helpful in the rebuilding of the Gulf Coast.

[mrreowwr_kittty]

4. Welcome to DU Kingbob!

Great point about the areas affected by Katrina. It really shows how little the current administration cares about the people who live in this country.

[CrazyOrangeCat]

6. Welcome, King Bob!

Your timing is impeccable. These thieves and liars and thugs are going to pay for what they've done to the poor and middle-class people of this country.

[intheflow]

14. "less than truthful and helpful in rebuilding"

Now that's an understatement! He's not afraid to traipse around town every few months, though, posing for photo ops. :puke:

Welcome to DU, KingBob. I'm guessing from your post and avatar you're in my relative neighborhood. Nice to have another voice from the Deep South join us. :hi:

[The_Casual_Observer]

3. What happened to the "soft landing" predicted by the real estate

industry?:evilgrin:

[Rockholm]

18. All real estate is LOCAL.

National numbers do not work in all regions, heck all states or even all towns.

New Home Sales. Where I live on the East Coast, there is very little "new home" construction. There is no land. Existing home sales, while the dollar figure has declined in my region, the median sale price of a single family home has gone up. There are plenty of overbuilt markets. Look at Las Vegas, Miami, Dallas. Tremendous inventories have built up and just where are the people coming from?
As CNN touts in their Maoney Magazine link, there are markets that are "bubble proof." San Francisco and Boston are two that I recall. There two cities have high employment figures, strong and ever improving job markets and high salaries.
Granted, it does take a good amount of income to afford to live in Boston, but people want to live here. They always will.

[ChairmanAgnostic]

5. hey, let's cut immigration too, and see what that does to demand

even if they are illegals.

[Ouabache]

7. and so will go sales of appliances, carpeting, curtains, paint, etc etc

All the things that are bought and placed in new homes after the new home sale are just about to go belly up too, and then all the things that the people who make those things buy. ad infinitum. But Republicans are still best for the economy according to Faux Noise Channel.

[unlawflcombatnt]

8. And Employment Too

All those things require workers to produce. The loss of demand for those goods will cause employment loss in those fields, along with employment loss in home construction.

Every part of the economy will be affected. And those effects are just beginning.

[PsycheCC]

9. Thanks for running down the numbers. Would you predict that

the housing crash will cause a recession in the overall economy this year?

[unlawflcombatnt]

10. Recession?

Yes, I do think it will cause a recession. So do some pretty well-renowned economists like Dean Baker, Peter Schiff, & Nouriel Roubini. I think Paul Krugman is also predicting a recession.

The Housing crash will be much bigger and cause more widespread damage than the Corporate propagandists have been predicting.

[nadinbrzezinski]

12. Some even mention depresion

so pay attention folks and get out of debt NOW

[frankenforpres]

11. maybe ill finally afford a house n/t

[fuzzyball]

13. What the sellers of homes lose, the buyers will gain equal amount

so the net difference is ZERO. For example if the seller
receives $10,000 less than expected, the buyer just saved
$10,000 which he can spend on other things.

No, it will not cause recession so long as UNemployment
is staying at record lows, and consumers keep spending.

[eridani]

16. Unemployment is not at record lows

Don't believe fudged data, which leaves out people not considered to be looking for work. Real unemployment is more like 10-15%, and quite a few of those jobs provide zero discretionary income.

[unlawflcombatnt]

21. You're so right about unemployment

"Unemployment is not at record lows"

You're right on the money about that. The government has manipulated the unemployment rate by simply reclassifying truly "unemployed" workers as "not-in-labor-force." During Bush's tenure, the number of people that have allegedly dropped out of the work force has been much higher than it was during the previous 6 years. Roughly 3.3 million more people have dropped out of the labor force in Bush's 6 years than in the previous 6 years. (During Clinton's last 6 years, 4.3 million workers dropped out of the labor force. During Bush's 6 years, 7.6 million have dropped out.)

Those 3.3 million unemployed workers are then removed from the total unemployment count. As a result, the unemployment rate is calculated using roughly 7 million workers, instead of using the true number of 10.3 million. If we added those 3.3 million workers back into the total number of workers unemployed, as well as to the total (participating) labor force of 152.784 million, the unemployment rate would be 6.6%.
{10.3 divided by (152.784 + 3.3)} = 6.6%.

Below are links to the referenced employment and labor force numbers from the U.S. Bureau of Labor Statistics.

Not-in-Labor-Force

Unemployment Level

Labor Force, Participating

The mis-classification of 3.3 million more workers as "not-in-labor-force" drops the unemployment rate by 2 percentage points. The employment-population ratio is a better indicator of employment & unemployment because it is much harder to manipulate by the government. Below is a copy of the statistics on employment-population ratio through December 2006.



Note that the employment-population ratio is still 1% point less in December 2006 than in December 2000. This statistic removes the "not-in-labor-force" manipulation. It's a measure of the total number of employed workers (roughly 146 million) divided by the total number of working age Americans (roughly 230 million.)

True unemployment is at least 6.6%, not the 4.5% concocted by the Bush plutocracy.

[fuzzyball]

22. Correct, the unemployment number does NOT include

those who are not looking for work and those whose
unemployment benefits have expired.

However that is how the unemployment was ALWAYS figured
and therefore it does have some value in comparing with
previous years.

When this REPORTED unemployment number approaches 6%, that
will flash danger signs of a recession.

[unlawflcombatnt]

27. Not-In-Labor-Force can be manipulated

Whether someone is actually looking for work is determined by answers on a questionnaire of a relatively small number of people (60,000) from the Household Survey.

Information obtained on such questionnaires is not only highly subjective, but also lends itself to manipulation.

The fact that the number of people who "dropped out" of the labor force under Bush is almost twice that during Clinton's last 6 years is very suspicious. There's no reason the current unemployment rate would be similar to Clinton's last year, while the number dropping out of the labor force is 2 times as high.

Furthermore, there's no reason why the unemployment rates would be similar, while the employment-population ratio is less. This suggests the current unemployment numbers have been manipulated to make the employment situation look better than it actually is.

In addition, if the unemployment rate was truly as low as the Bush plutocracy claimed, real wages would have risen as much as they did under Clinton, because of supply & demand effects. But real wages have risen only a little over 1% during Bush's entire term. Clearly there is not the supply shortage of workers suggested by the (artificially) low unemployment rate.

All evidence indicates the government has manipulated the total unemployment number to deceive the American people. Fortunately, many of us are seeing through it.

[Rockholm]

19. Your assumption is the buyer wasn't an owner?

With near 70% home ownership in America, chances are pretty good that if Seller A gets $10,000 less, Seller B is getting the same $10,000 less. Unless you are moving from one town to another within your metro area. In Boston, if you sold your home in Newton for $1,000,000 you could easily move to Brockton for $300,000 and pocket the difference. People generally don't make moves like that, but I guess anything is possible. There are people in Boston who think they are going to make it big by selling here ind moving to Florida. Housing is just as expensive and the income levels aren't there.

[fuzzyball]

24. I think you are confusing a sale vis a vis a sale and a move

Every housing sale has ONE buyer and ONE seller.
So, when you look at the ONE transaction, what the
seller may lose is EXACTLY the amount the buyer keeps
in his wallet.

[intheflow]

15. Never could have seen that coming.

:sarcasm:

[formercia]

17. Our neighbor was smart

His family was in the business of buying fixer-uppers, upgrading and reselling. They sold their big home and moved into the small unit next to us that they redid last Summer but didn't sell. Many won't be so fortunate.

[BleedingHeartPatriot]

20. As I heard this information on CNN, I was intrigued by their spin. The meme seems to be this:

"As we all have known for a quite a while, the housing market is still having some troubles as it "levels out". This drop in new home sales is just part of the "leveling out" and of course we've been talking about this so it's no surprise to anyone. Now, on to Anna Nicole's baby's DNA testing...."

MKJ

[unlawflcombatnt]

23. Media Spin

Yes, it's "leveling out" if you consider a consider a vertical drop off a cliff as "leveling out."

And it hasn't "bottomed out" yet either. But it certainly is "heading for the bottom."

[randycrow]

25. The blast of real estate bad news timing's bothers me

because there seems to be a line of thinking that investors have a choice, support the wars or the stock markets are going to crash to the center of the Earth. I have bad mouthed comrade Greenspan for years for creating a Ponzi economy. Certainly the economy is weak and the real estate market has always had a massive influence on the economic health of the nation. The good news about the for closures and slow pay is the figures are finally coming out. All this said, normally high interest rates destroy the construction business. As a manufactured home dealer in Pearland Texas during the early 1980s when the Federal Funds rate went to 16% and it was basically impossible for me to give a home away. Winter home sales are always horrible. Comparable month year to year is a good comparison which did not jump out at me from the info above. Thanks to Greenspan there is massive misery built in to his lowering the Fed Funds rate to .25%. However I am suspicious when Greenspan runs his mouth and markets crash and the timing of the real estate bad news especially when the Neocons want everyone they can get to go along with escalating the wars. Oil has already doubled since comrade Little George was anointed, but oil prices could go much higher if shooting starts in Iran. The economy may be horrible now but just wait for what is in store if oil goes to $250 per barrel and some Paul Volker type decides to raise interest rates to 20% to cool inflation. Sorry for the double talk. One of my sons has said I am even talking like a politician.

[BluePatriot]

42. Welcome randycrow!

My parents had to walk away from a new home due to ill-fated timing and spiking interest rates during the Houston housing bust in the early 80s.

[unlawflcombatnt]

26. S & P - Shiller Home Price Index

According to some market analysts, today's release of the S&P-Shiller Home Price Index is what caused the markets to decline. The index of 20 major metro areas showed home price declines in most areas. Below is a copy of the graph on page 2 of today's index publication.



It looks like a pretty sharp downward trend, with absolutely no evidence of slowing down or "bottoming out."

The direct link to today's publication (in pdf format) is
http://www2.standardandpoors.com/spf/pdf/index/032707_homeprice.pdf

[kineneb]

28. connecting the dots, observations from today's Stock Market Watch(LBN)

Let us include the OP information, along with the following headlines/themes which I jotted down:

-Auto makers fudge numbers on sales
-Inflation "misreported"
-Consumer Confidence declined 2 points since last month
-Crude oil near 3-year high ($62.90)
-Forclosures up, subprime lenders going out of business
---Florida: nearly 20,000 properties in forclosure in Feb.
---California: forclosure filings up 79% compared to last year
-Connecticut sees arrest of the President of Mortgage Lenders USA Inc. for failure to pay employees
-Dollar hits 7-year low
-China to purchase Iranian oil in Euros
-German economic growth up
-David Stockman charged in fraud case
-Stocks down
-Persian Gulf states move away from dollar towards Yuan and other currencies

Connecting the dots... things are generally not looking very rosy in Financial Land, despite the gov./media spin. In fact, in the words of a person being interviewed on the BBC, the manure is about to hit the ventilator.

[unlawflcombatnt]

29. Thanks for the Summary

I hadn't seen the first 2 of those, though I suspected the inflation numbers were fudged.

Is it official now that the Iranians using Euros now for their oil sales?

[kineneb]

30. looks like a shift to use of Euro/combined currency basket

by most of the ME oil countries, not wholesale, but incrementally.

[unlawflcombatnt]

31. Iran

Thanks again for the update.

I was wondering whether Iran had gone to Euros, since I'd read some sources online that claimed Iran was switching oil sales over to Euros on March 21, 2007. But I'm not sure how reliable that information is. Since Iran has been threatening to do this for over a year, it sounded like an empty threat.

unlawflcombatnt

Economic Populist Forum

EconomicPopulistCommentary

[kineneb]

32. "Subprime Mortgage Collapse Eviscerates California Headquarters"

(from Bloomberg- holy crap!)


By Daniel Taub



March 28 (Bloomberg) -- The words ``New Century'' used to flash several times a day on caller ID at Taleo Mexican Grill in Irvine, California, where diners wash down Salmon Veracruz with $7 hand-shaken margaritas. Reservations were often for 10 or more.


Not anymore, said Nic Villarreal, the owner of the restaurant, located two blocks from New Century Financial Corp.'s headquarters. ``We don't get any.''


In Irvine, where just nine months ago office vacancies approached a three-year low, home prices were at an all-time high, and unemployment was less than the national average, at just 3.6 percent, the unraveling subprime mortgage market is ruining the recent prosperity.


Hometown lenders including New Century and Ameriquest Mortgage Co. already have fired more than 3,000 people, house and condominium prices are down 17 percent since June and office vacancy rates are poised to double this year, said John McDermott, regional manager for Orange County at commercial real estate broker Sperry Van Ness.


``It's a huge engine that has been shut off,'' McDermott said. ``I don't know where the new influx of jobs are if you take the lending market out of the equation.''


more at:
http://www.bloomberg.com/apps/news?pid=20601103&sid=alOjASNOLKcQ&refer=us

[1932]

35. That's one of the most informative articles on the real estate market I've read recently.

Well done Daniel Taub.

[1932]

33. What happened to those two SoCal DU'ers who used to berate you every time

you posted about this a couple months ago?

[unlawflcombatnt]

36. Maybe they've seen the light

Eventually the housing collapse has to become obvious to anyone. Prices are declining, sales have fallen off a cliff, and new home starts and permits are down significantly over the last year. Foreclosures are up. The number of vacant homes is now at over 2 million, up from roughly 1 million in 1996.

unlawflcombatnt

Economic Populist Forum

[1932]

40. It's funny, because I think they were doing exactly what they accused you of doing.

Weren't they accusing you of lying because you had a vested interest in the direction the real estate market was heading?

[unlawflcombatnt]

41. Yes

One of them was certain that I was "shorting" the housing market for fun & profit. In reality, I don't own a home, nor have I ever owned a home.

They're probably very busy trying to sell their speculative home purchases.

[yourout]

34. With 3 boys under 22 I wonder how they will ever be able to buy a house.

Yes it nice that my house is worth 2x what it cost 15 years ago but there is no way for a young couple starting out to even think about a house.

[BluePatriot]

43. Thank you for realizing this

At least your kids won't be pressured to get into a home when it's impossible, unlike what my family is doing to us newlyweds...

[onecent]

37. And in B***World it's not easy to buy a house without a job.......$7.00 per hour

just ain't gonna hack it.

[capi888]

38. Thanks for posting this!

I have stated to others that the unemployment rate was MUCH higher then the report given by our Gov't. This proves the underemployed and the non=employed...I live in Michigan, and its in sad shape! Thanks

[unlawflcombatnt]

45. Unemployment

The manipulation is hard to contest when one sees how many more people have allegedly dropped out of the work force during the last 6 years. There's no reason why the number would be almost double that of the previous 6 years, while the unemployment rate would be nearly the same. The "low" unemployment rate has been achieved simply by reclassifying unemployed workers as "not-in-labor-force." Again, the real measure should be the employment-population ratio, which is 1% lower than it was in December of 2000.

[Clarkie1]

39. Great news! nt

[Allenberg]

44. I'm pretty happy with the housing market.

I just closed on a 90K house for 78K here in Pittsburgh at 30 years a 5.75 fixed rate. :woohoo:

I did go through VA, though.