Interest Rate Roundup

Tuesday, December 23, 2008

November new and existing home sales both fall

We got a two-fer today: Data on both new and existing home sales for the month of November. So what did the numbers from the Census Bureau and the National Association of Realtors show?


* New home sales dropped 2.9% to a seasonally adjusted annual rate of 407,000 from 419,000 in October (originally reported as 433,000). That was slightly worse than the forecast for a reading of 415,000, and the lowest sales rate since January 1991 (401,500). Sales were off 35.3% year over year.

* The raw supply of homes for sale continues to decline due to aggressive cutbacks in home construction. It fell 7% to 374,000 from 402,000 in October. But the "months supply at current sales pace" indicator of inventory only inched down to 11.5 from a revised 11.8 in October, which was the current cycle high (and the highest level ever according to my data, which goes back to 1963).

* The median price of a new home fell 11.5% from a year ago -- to $220,400 from $249,100. That was the second-biggest drop for the cycle behind the 12.7% YOY drop in March 2008.


* Sales tanked 8.6% to a seasonally adjusted annual rate of 4.49 million units from a revised 4.91 million in October. That compared with an average estimate of 4.93 million and 5.02 million units a year earlier. It's the lowest level on record for the data series, which includes single-family homes, condos, and coops. Single-family only sales, at 4.02 million, were the weakest since July 1997 (3.88 million).

* The inventory of homes for sale inched up to 4.203 million units from 4.198 million. The "months supply at current sales pace" indicator of inventory rose to 11.2 months from 10.3 in October. That ties the cycle high set in April 2008.

* Home prices dropped 13.2% to $181,300 from $208,800 a year earlier. That is the biggest decline on record. Home prices are now at their lowest level since February 2004 ($180,900).

At the risk of sounding like a broken record player, the latest housing market figures still paint a grim picture. Both new and existing home sales fell in November. For-sale inventory readings remain at or near all-time highs. Home prices continue to slump, with double-digit declines on both the new and existing sides of the ledger.

Treasury and the Fed are doing all they can to lower mortgage rates and stem foreclosures. But they're having a very tough time fighting the simple law of supply and demand. The housing market remains dramatically oversupplied, despite very sharp cutbacks in new home construction. Moreover, demand remains weak due to slumping consumer confidence, tighter lending standards, and rising unemployment.

Bottom line: It's going to take even more time and even lower home prices to get back to a healthy state of equilibrium in housing. Anyone looking to Washington for a quick fix to this downturn is going to be disappointed.


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