New Home Sales Plunge to All-Time Low in JulyIt's a summer for the record books in the beleaguered U.S. housing sector -- and not in a good way. New-home sales unexpectedly plunged 12.4% in July to a 276,000-unit annual rate -- the lowest level since the U.S. Commerce Department started keeping records for the statistic in 1963.

Economists surveyed by Bloomberg had forecast new-home sales would rise to a 340,000-unit annual pace in July from a revised 315,000-unit rate in June. Instead, they fell, and the June revision lowered last month's sales gain from the previously-released 23.6% rise to a to 12.1% rise. Revised sales rates for May and April came in at 281,000 and 414,000, respectively.

When combined with July's 27.2% plunge in existing-home sales to a 3.83-million-unit annual rate -- that metric's lowest level since 1999 -- the picture is one of a U.S. housing sector that is cratering since the home buyer tax credit program ended on April 30. New-home sales have plummeted by about 33% since April -- roughly the last month when a buyer could purchase a new-home and still meet all the deadlines to qualify for the tax credit.

Inventories rose to a problematic 9.1-month supply in July at the current sales pace, up from a 7.6-month supply in June. A normal market has a roughly three- to five-month supply of new homes for sale.

Potential Home Buyers Are Understandably Cautious

New home sales fell in every region in July: down 13.9% in the Northeast, 8.3% in the Midwest, 8.7% in the South, and a stunning 25.4% in the West. The median sales price was $204,000 in July, a 4.8% decline from a year earlier, and substantially worse than the 0.6% year-over-year decline recorded in June.

Given the current new home sales pace, the July data also suggests the new home sale market will need about three quarters, perhaps longer, to return to a normal 700,000-unit to 800,000-unit annual rate.

The factors weighing on both new and existing home sales are largely macroeconomic. With inventories high, Americans sense that home prices will be lower in three or six months, which is causing many potential buyers to delay making purchases, calculating that they'll get a better deal down the road. Given the current real estate trends, chances are they'll be right.

Prospective home buyers are also concerned about the durability and strength of the U.S. economic recovery, which slowed in mid-2010, and its impact on the weak job market. Historically, periods of employment uncertainty have taken a percentage of buyers out of the housing market.

July's new home sales report paints a picture of a U.S. housing sector that lacks enough organic demand to push sales higher in a sustained way. The steep declines in both new and existing homes sales have occurred during the summer season -- historically a strong period for home sales.

When combined with the slowdown in the U.S. manufacturing sector, the abysmal conditions in the housing sector reflect the ongoing loss of momentum in the U.S. economic expansion. Absent a large rise in business investment, retail sales or exports, those tepid growth conditions could continue well into the fourth quarter, and if business investment or exports decline, a double-dip recession could occur.

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longanman

Only 60% of the households in America actually own their home. These people are paying most of the taxes. In effect they have become tax mules carrying the major tax burden in this country. Anyone that is underwater in their home would be a fool to keep on paying, home ownership has become a form of economic slavery. You don't really own the home in effect you just lease it from the Government and if you do not pay the taxes they will take it away from you and sell it to some other fool that will pay.

August 26 2010 at 6:55 AM Report abuse rate up rate down Reply
1 reply to longanman's comment
Darrell Hansen

don't forget...if you rent, you are paying property taxes too. They're built into you rent payment.

August 26 2010 at 9:21 AM Report abuse rate up rate down Reply
longanman

The Federal Reserve under Greenspan caused the housing crisis, in an attempt to create a condition that would allow the federal and local governments to collect increased taxes. The seeds for this disaster were planted in 2003 when the Federal Reserve set artificially low interest rates. In the five years prior to 2008 housing had risen on average 180%, meanwhile wages optimistically had risen 17%. There has to be some correlation between what you pay for a home and what you make, this wage to housing matrix is way out of wack. The Federal Reserve by having artificially low interest rates had caused this speculative real estate market where housing has risen way out of reason. The low to middle class homeowner has been trapped in a mortgage that they are upside down in. Its simple if you bought a home in the two years prior to 2008 you owe twice what the home is actually worth. The Federal Reserve caused this over valuation so the increased real estate valves would allow the Government to collect increased taxes. The Federal government collected a windfall of capital gains taxes on real estate flipped and Local governments collected vastly increased property taxes. Call it the war tax, someone has to pay for the trillion dollar Iraq war. Lower interest will not help the homeowner who cannot afford the increased taxes and the increases in insurance.

August 26 2010 at 6:54 AM Report abuse rate up rate down Reply
snosnake18

I am sure they will be blameing bush for Obamas failers for the rest of Obamas life to liberals he can do no wrong.to bad he wont do right for america ,but then liberals/socialist are like that cant learn from their mistakes so things dont get better

August 25 2010 at 11:57 PM Report abuse +7 rate up rate down Reply
sallyanncohen

I cannot stand Mr. Biden - every time Obama wants to avoid discussing the economy he sends Joe out with his malarky -- does Biden not see the free fall housing is in plus the entire economy?? - oh yes Biden your administration is responsible...Obama's has never run a business; he has only been part of liberal elites - small business is crashing; the stock market has had a large decline and millions are out of work so why continue to be deceiving in your comments???? SHAME ON ALL OF TEAM OBAMA.

August 25 2010 at 11:53 PM Report abuse +8 rate up rate down Reply
Equal Real

Many of the new homes recently built are smaller and cheaper built. My experience has helped me be a wiser potential buyer. Community fees, development restrictions, options and upgrades can be costly. Sometimes I have found that the included appliances are subject to recall. I have found foundation and verneer cracks, improper roof mounting. etc. . These houses may be reduced in price but believe that the value has already been reduced. Study the lay-out, calculate the investment value and be smarter than the agent. Homework pays.

August 25 2010 at 11:11 PM Report abuse +4 rate up rate down Reply
rickmt57

Its time to get rid of team Obama....I'm so tired of hearing his little team playing Senators and Reps say how they have saved 3 million jobs. But what they dont tell you that is cost over 200,000 dollars to save each one of those jobs based on what they have spent of the stimulas money. If you ask me that not very good return on OUR money pluse the fact they grew the deficit by another trillion dollars to do so. Why does it only cost the private sector about 25 to 30 thousand dollars to creat a job and the government 200,000 dollars? We need government to get out of the way and stop putting so many regulations on business that they cant grow. If this is the change you voted for then I'm sure you will vote for team obama in November but if its not then you have a chance to vote out team Obama.

August 25 2010 at 10:50 PM Report abuse +4 rate up rate down Reply
rickmt57

Its time to get rid of team Obama....I'm so tired of hearing his little team playing Senators and Reps say how they have saved 3 million jobs. But what they dont tell you that is cost over 200,000 dollars to save each one of those jobs based on what they have spent of the stimulas money. If you ask me that not very good return on OUR money pluse the fact they grew the deficit by another trillion dollars to do so. Why does it only cost the private sector about 25 to 30 thousand dollars to creat a job and the government 200,000 dollars? We need government to get out of the way and stop putting so many regulations on business that they cant grow. If this is the change you voted for then I'm sure you will vote for team obama in November but if its not then you have a chance to vote out team Obama.

August 25 2010 at 10:50 PM Report abuse +4 rate up rate down Reply
rickmt57

Its time to get rid of team Obama....I'm so tired of hearing his little team playing Senators and Reps say how they have saved 3 million jobs. But what they dont tell you that is cost over 200,000 dollars to save each one of those jobs based on what they have spent of the stimulas money. If you ask me that not very good return on OUR money pluse the fact they grew the deficit by another trillion dollars to do so. Why does it only cost the private sector about 25 to 30 thousand dollars to creat a job and the government 200,000 dollars? We need government to get out of the way and stop putting so many regulations on business that they cant grow. If this is the change you voted for then I'm sure you will vote for team obama in November but if its not then you have a chance to vote out team Obama.

August 25 2010 at 10:50 PM Report abuse +3 rate up rate down Reply
bagsamoney

Why is everyone surprised that people are not buying homes now that the BIG housing bailout money has stopped. Obama fixed nothing he just delayed the inevitable. If the government had kept their hands off the housing market it would have already, naturally, hit bottom and then begin to climb. So now billions of our hard earned money was spent and the housing market is back where it left off last year! And Obama just keeps on spending our children's money!

August 25 2010 at 10:50 PM Report abuse +6 rate up rate down Reply
rickmt57

Its time to get rid of team Obama....I'm so tired of hearing his little team playing Senators and Reps say how they have saved 3 million jobs. But what they dont tell you that is cost over 200,000 dollars to save each one of those jobs based on what they have spent of the stimulas money. If you ask me that not very good return on OUR money pluse the fact they grew the deficit by another trillion dollars to do so. Why does it only cost the private sector about 25 to 30 thousand dollars to creat a job and the government 200,000 dollars? We need government to get out of the way and stop putting so many regulations on business that they cant grow. If this is the change you voted for then I'm sure you will vote for team obama in November but if its not then you have a chance to vote out team Obama.

August 25 2010 at 10:50 PM Report abuse +2 rate up rate down Reply