Interest Rate Roundup

Wednesday, June 23, 2010

New home sales implode in May, hit record low

We just got figures on the new home market in May. Here's a recap:

* New home sales collapsed a whopping 32.7% in May after jumping 14.7% in April. That left the seasonally adjusted annual rate at 300,000, compared with a revised 446,000 in April and a consensus forecast of 410,000. That is the lowest level in the history of the data, which goes back to 1963. Regionally, sales dropped 23.9% in the Midwest, 25.4% in the South, 33.3% in the Northeast, and a whopping 53.2% in the West.

* The raw number of homes for sales slipped slightly to 213,000 from 214,000 in April. That's the lowest level going all the way back to November 1970. Compared with a year earlier, inventory was down 26.8%. The months supply at current sales pace indicator of inventory surged to 8.5 from 5.8. That's the highest since June 2009.

* Median prices fell 1% to $200,900 from $202,900 in April. On a year-over-year basis, prices tanked 9.6%, the biggest such drop since July 2009.

The May new home sales figures were so awful, I'm at a loss for words. Sales imploded by almost a third, with a whopping 53% plunge out West. While raw inventory held steady at the lowest level in almost four decades, prices dropped by almost 10% from a year ago as demand cratered. That's the biggest drop in almost a year.

We all knew there would be a housing hangover from the expiration of the tax credit. But this decline takes your breath away. Something else is at work, and it's the labor market. We simply aren't creating private sector jobs in this country, and until we start doing so, we're not going to see healthy housing demand. No wonder builders are getting much more pessimistic, construction activity is dropping, and lumber prices are taking an Acapulco cliff dive!

Tuesday, June 22, 2010

Existing home sales drop in May

Existing home sales figures for May were just released. A recap can be found below ...

* Existing home sales fell 2.2% to a seasonally adjusted annual rate of 5.66 million in May from 5.79 million in April. That was far worse than forecasts for a sales rate of 6.12 million, and comes on the heels of a 8% gain a month earlier.

* Regionally, sales were a mixed bag. They tanked 18.3% in the Northeast and held steady in the Midwest. Sales inched up 0.5% in the South and gained 4.9% in the West. By property type, single family sales fell 1.6% while condo and coop sales dropped 6.8%, the sharpest monthly decline since January.

* The raw number of homes for sale fell 3.4% to 3.89 million from 4.029 million in April. Compared with a year earlier, supply was up 1.1%. The months supply at current sales pace indicator of inventory dipped ever so slightly to 8.3 from 8.4. Median prices rose 4.2% to $179,600 from $172,300 a month earlier. They're also up 2.7% from the year-ago level of $174,800.

The second burst of activity in the housing market, courtesy of the tax credit extension, appears to be running out of steam. Existing home sales came in well below expectations in May. New home orders are trailing off. Lumber prices have plunged more than 40% in a virtual straight line. And purchase mortgage applications and builder confidence are both hitting the skids.

We still have cheap homes and cheap mortgages there for the taking. We just don't have a lot of buyers willing or able to step up to the plate. That will likely remain the case unless and until we get some momentum in the job market. So far, that's MIA.

Tuesday, June 15, 2010

NAHB index tanks in June

The National Association of Home Builders reported its latest figures on home builder optimism -- and they were plum ugly. The headline index tanked to 17 in June from 22 in May. That was far worse than the 21 reading that economists were looking for.

All three sub-indices fell: The index tracking present sales dropped to 17 from 23 ... the index tracking expectations about future sales fell to 23 from 27 ... and the index tracking prospective buyer traffic slumped to 14 from 16. Regionally speaking, the gentlest declines were in the Midwest (down to 14 from 17) and the South (to 19 from 22). The West index dropped to 15 from 19 while the Northeast index was nearly cut in half, falling to 18 from 35.

The latest housing market figures remind me of what happens when an athlete stops taking steroids. Those tackling and batting records pass into the history books -- and all you're left with is a washed up guy whose best days are behind him. In the case of housing, the home buyer tax credit clearly juiced sales through the spring. But the drugs have now been taken away, and we're seeing sales slump as a result. In fact, we haven't seen a monthly decline this severe since November 2008 -- in the depths of the credit crisis and recession.

Housing remains very affordable, thanks to the double-barreled benefit of cheap financing and cheap pricing. But we're lacking a catalyst for a robust recovery, especially when you consider the lackluster state of the U.S. labor market. So don't look for the housing or construction industries to hit the ball out of the park any time soon.

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