Is housing hitting bottom?
Filed under: Economy
Tepid conditions persist in the new home sector, but lukewarm activity was still enough to ignite hope for a possible housing bottom later this year.
New home sales were roughly unchanged in March, the U.S. Commerce Department announced Friday, boosted by an upward revision in new home sales for the two previous months (pdf). New home sales fell 0.6 percent to a seasonally-adjusted annual rate of 356,000 from 358,000 in February. The February figure was revised up from 337,000, and January's sales pace was revised to 331,000 from 322,000.
Economists surveyed by Bloomberg News had expected March new home sales to register a 330,000 annualized rate. Further, sales have declined 30.6 percent in the past year.
Meanwhile, the median sales price of new houses sold in March fell 12.2 percent from a year ago to $201,400, the Commerce Department said. It was the lowest median home price since December 2003.
Is a housing bottom approaching?
James O'Sullivan, senior economist at UBS Securities LLC in Stamford, Conn., tried to make the case for a bottom in housing.
"Through the ups and downs, sales have been close to flat in recent months," O'Sullivan told Bloomberg News Friday. "We expect sales to start trending up again in coming months."
Meanwhile, inventories declined 5.2 percent in March to 311,000 to total a 10.2-month supply at the current sales pace. Inventories have declined 33.7 percent in the past year -- a large decline -- but economists underscore that the inventory decline originated in a housing market bloated with foreclosed homes, builders' speculative excesses, and a large supply of homes by typical Americans unable to sell their home at what they consider an acceptable price, due to the recession. A healthy, normal new home sale market typically has a three to five month supply of homes on the market.
Investors should follow the new homes sales statistic because, historically, increases in home sales are strongly correlated with increased demand and an economic expansion. That's because housing activity does not operate in vacuum. When new homes are sold, homeowners tend to buy durables goods and big ticket items for the new home: furniture, appliances, home supplies -- an uptrend in each of which is good news for the economy and bullish for the U.S. stock market.
However, government statisticians also caution that the new home sale statistic contains a margin of error and is subject to revisions. Further, economists note that it typically takes three to five months to detect a trend, so investors should not read too much into data from one month.
Housing Analysis: The investor stance toward the March new home sale report will vary depending on whether one emphasizes the bright side or the not-so-bright side. On the upside, we did see an upward revision in new home sales for February and January. On the downside, the nation still has a enormous 10.2-month supply of new homes on the market. That large inventory suggests that median prices, which have fallen 12.2 percent from last year to $201,400, are likely to fall further.
Bottom Line: When combined with a 4.57-million annualized sales rate for existing homes, it's clear that weak housing conditions persist in the nation. That said, the rate of sales decline appears to be moderating and inventories are dropping; that suggests the U.S. housing sector could start to form a bottom this year.
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Reader Comments (Page 1 of 3)
4-24-2009 @ 12:52PM
DAVID L. WEST said...
It was my understanding that there was a rise only in "first-time home buyers", not in new or existing homes. Perhaps AOL could check the accuracy of this report.
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4-25-2009 @ 8:45AM
scott said...
This is a govt stat that measures New Home Sales - Census Dept -
It says nothing about first time buyers or new buyesrs
Maybe you should get your facts straight
4-24-2009 @ 3:37PM
Richard said...
I hate to burst your bubble. The value of real estate is connected ONLY to the ability of the American (and some forign) families ability to pay a mortage. Do we see a flood of jobs comming back to the USA? No we do not.
The most affected part of the market is the working families income. Besett by decades of federal neglect in the immigration policies and service, the attitude that it will not hurt our economy if we allow jobs to be shipped overseas by the millions pay for American working families is down. Without the ability to spend, our"consumer economy" has been trashed.
When we were looking at the gnp for the last two decades the only bright spot in in financials sector. This has proven to be false profits, built on speculation and dreivitives. If we take those false numbers out of the equation, our economy has been sliding badly.
Reagans tampering and the scocial redistribution of wealth (to the wealthiest) has left us unable to carry on the unsuitable economy that emerged.
Poeple in the corporate media have been blaming the "sub standard mortages" for the problem. This was not the problem, the problem was the jobs leaving and the devaluation of the American worker. Little is said on these factors in the American standard blame game. If the banking industry hadn't spent 50 billion in lobbying to change the "regulations put in place after the last depression, we would not have been in this position.
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4-25-2009 @ 10:48AM
Jonathan said...
excellent
4-24-2009 @ 1:57PM
LeAnn Kirrmann said...
Dear People,
This is incredible that the debt will be so much. It is incredible that Obama now says prosecutions may take place for memos written by previous administration. One of those that may be prosecuted is former Solicitor General Ted Olson. Who lost his wife when a plane crashed into the Pentagon on 9/11. May the idiots who think this is ok be prosecuted for anti American activities.
FLifeforce@aol.com
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4-24-2009 @ 2:29PM
Brian S said...
Criminal activity comes with consequences, period despite any personal issues...no individual is above the law, especially those entrusted to uphold it.
4-24-2009 @ 2:23PM
dan said...
LeAnn I guess you're about torture. The torture memos came from the top down, Bush, Cheney, etc.. So the lowers were doing the job of the people in charge and they, the people in charge should be investigated and held accountable for their actions. It's disgusting what they did to innocent people as well as the enemy, and it is UN American. We are not about torture and this needs to come to an end with an outing that will be remembered for a long time by future administrations.
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4-24-2009 @ 2:41PM
roger said...
dan you really must be kidding. Based on your comments i would guess it was improper to drop the bombs on japan to end world war 2. After all inocent people were killed including children. You must feel the president that ordered it should have been tried, convicted and imprsoned for such a terible thing. Maybe you feel that was justified. If so maybe instead of waterboarding the prisoners we should have just shot them in the head and skipped the water boarding.
4-24-2009 @ 2:32PM
David said...
The housing bottom has not hit bottom!
I am for any method that protects any American for another 9/11.
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4-25-2009 @ 12:16AM
birdbrain said...
How the hell do you know. My guess is that you make minimum rate and are hoping your comment will help keep people out of the housing market so that soon you'll be able to afford a 5 bedroom home in Las vegas for penny's on the dollar.
4-24-2009 @ 4:07PM
Richard said...
Mark: this is funny only as it misplaces the problem. You have got to quit watching the corporate media, they are befuddleing your thought processes. The part of the videos that put blame on the mortage companies I'll go along with. aThe part that shows the LENDING parties at fault is mostly right wing/noe-con(false conservitives(Republicans now))/banking industry claptrap.
People believed the housing market would remain in an upswing, who told them differently?
The fault belongs to Reganomics, the watering dowe of the American wage scale via the over immagration and the
wholesale removal of jobs overseas.
The die for this was cast 20 + years ago, the fix is only starting now and IT is being held up by the Republican Neo-cons.
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4-24-2009 @ 5:30PM
Mike Moran said...
No one can stop jobs from "going " anywhere. The faster and cheaper the ability to ship coupled with overseas populations able to produce a given product more cheaply will lead inevitably to jobs going wherever they want.
The U.S. must innovate or die.
Money/investors must encourage innovation, and jobs will follow. Lower taxes keep money here in the USA. It is that simple.
4-24-2009 @ 6:36PM
tox said...
Its ridicules to think the present crisis that took over 20 some years to create is going to be fix over night. We as American have been living in a dream world, the spending don't by Obama & Bush in the government sector, and before by the private sector is crazy to thing we be out of the water in less than two years is that kind of thinking that got us in the first place. Homes would have to drop about 60% in the east like NY, NJ and the rest of the states about 40%. Salaries for the masses have not increase since 1971 the average was $16.00 per hour for a blue collar worker that is the same salary I starter twenty years later after a two year degree, and the starting salary now is 16.50 in the same company.
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4-26-2009 @ 11:12PM
Sarah said...
I agree they've been living in a dream world about money...and giving out so many loans to people who for so many things, they didn't even care if people couldn't afford it and only make minimum payments if that...but it was really telling about the character of people who used the loans to buy things they didn't need; they think as long as you have any job, you can buy whatever you want. Since so many were spending 2 incomes to live as if they were my highly educated husband when they weren't, appearances said there was all of this wealth when they should have been saving more and not marrying for materialism. Then everyone expects it....they think there's so much stuff and money to be had based on what they see....and hear.
Even older wealthy men know they can get much younger well educated and wealthy to some extent women.. Expectations are just so high...with women have entering the workforce...a well educated woman now might have 3 degrees and be superwoman to land a much older husband (BECAUSE HE CAN GET IT), who will actually buy her a house and she goes with him to be treated the way she feels right about because she can't get it from her own age group, etc. Now she wouldn't be sold on him without the money, but he's sold on her accomplishments, so she gets the money; what IS the difference? ALL women are the same, as they are meant to be in this area. It's true some support husbands or boyfriends, and they are very bad for other women, because then some men want or look for this themselves. However, some of it is circumstantial, and should be seen for what it is. Some men chose to work even if they're wife makes alot. Others believe it or not, would like to be a househusband, and they've sought out a working woman to support their lazy sick butt, one with boyles and warts on her face, who has a weight problem, and married them so they won't have to work. Absolutely frightening but true.
4-24-2009 @ 4:41PM
Dale Bennington said...
No The housing Markets has not yet even come close to hitting Bottom. If you will open your eyes you will see the only people buying homes are investors. The everyday individual can not
qualify for a home Morgage. If those who are still out there do their jobs correct. When qualifing someone for a home loan
they will find if they do their math correctly. Anyone making $13.00 hr up too $20.00 Hr will not qualify. Especialy if these people have a credit score of less than 750. The only thing that will happen is they will be producing more sub prime Morgages.
A person making $13.00 Hr is spending 30% of their income for Taxes. A Morgage payment of $800.00 with taxes and insurance included. 38% of this persons income.
Electric bill Average $150.00 mo. 6%
car insurance $100.00 MO 5%
car payment $300.00 15%
This alone is 94 % of a families income.
Now how are suppose to survive and qualify for a home loan.
The finnal figure for many in America who are trying to survive
on this type income believe it or not is 250% we are actually spending each month. In other words we are still robbing peter to pay Paul.
Who is at fault those in the Morgage and insurance Markets.
Their greed of wanting to profit over the years more and more has done notting except put them selves out of business
and the American people out in the streets.
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4-25-2009 @ 9:19AM
Tony said...
Mr. BENNINGTON: In my opinion you are pointing to near by the real reasons why a regular family can not in ANY way they can afford to buy not even a condominium; the Taxes, P. S. E.& G., Insurance,Maintenance Mortgage and the rest of the payments none is cappable of buying not even food. In my opinion the abuse of the politicians with the skyrocketing taxes on every field are killing the American Dream while they are living their lavish style of living from Mr. Obama's 747 to the Senators, Governors, Mayors and all the rest of the people that they where supposed to work for our behalf, but not they are working for their salaries, benefits,pensions,free credit cards,1st.class hotels and meals AND SECURED RETIREMENT PLANS and the regular citizens starving and if we are complaining the politicians they call us communist.Here is the end: enough is enough. Good luck to you Mr. Bennington.
Tony
4-24-2009 @ 4:42PM
JoJo said...
Home prices here in NJ still suck, dumps still going for upward of 350k so I don't know why they say the "mean" home prices are aproxx. 200k, not in NJ there not, I looked at some very small condo's in the 270-350k price range but no nice or God forbid new homes for under 380k, so as far as I am concerned the market still needs to keep coming down so that ppl like me can afford the home & the ridiculous taxes here in sucky NJ! Time to get out!
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4-24-2009 @ 5:21PM
jim said...
DEMOCRATS WERE WARNED ABOUT AN ECONOMIC MELTDOWN..THEY DID NOTHING ABOUT IT...
http://www.youtube.com/watch?v=cMnSp4qEXNM&NR=1
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4-24-2009 @ 6:53PM
JD said...
I live in Florida and the housing market has not hit bottom here. New homes sitting empty, existing homes sitting empty and some companies are still building condos! The only people buying are investors. Average working person here can't afford to buy, with taxes, insurance, etc.
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4-24-2009 @ 7:59PM
Laura said...
Homes here in Southern California are still overpriced. Dumps are going for 400,000
My spouse and I still can't get refinanced and our credit score is 833. We have tried for about a year to get refinanced.
My spouse has a six figure salary.
Also, we now owe more than the house is worth. What a nightmare.
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