August New Home Sales Stumble to Second Lowest Level Since 1963It was, to paraphrase Shakespeare, the summer of our discontent in the U.S. housing sector: August's new-home sales clocked in at a 288,000-unit annual rate, unchanged from July's revised rate, and the second lowest level in 47 years.

The consensus prediction of economists surveyed by Bloomberg had been that new-home sales would rise to a 290,000-unit annual pace in August. New homes sales were revised to 312,000-unit and 282,000-unit paces in June and May, respectively, making the May level the new all-time low.

After plunging about 30% in May following the expiration of the federal government's home buyer tax credit on April 30, sales flat-lined this summer at a roughly 295,000-unit average annual pace -- suggesting that the home buyer credit was responsible for a substantial portion of the early-2010 sales gains.

The summer swoon is all the more distressing because summer historically has been a strong sales period for both new and existing homes. Existing home sales fell about 25% this summer.

Sales Heated Up on the Coasts


New home sales are now down 28.9% in the past year, and off about 64% from the average 800,000-unit annual rate that prevailed during the Roaring 1990s, a period of strong U.S. GDP growth and job growth.

New home sales are also about 74% below the average 1.1 million-unit annual rate recorded during the 2002-2007 real estate bubble, but almost no economist expects the housing sector to return to that lofty, problematic-mortgage-fueled level, due to weaker household formation.

One August bright spot: Home inventories dipped to an 8.6.-month supply at the current sales pace, down from a revised 8.7-month supply in July. Even so, inventories are still well above normal levels of three to five months.

The August sales results also showed a significant location-based dichotomy: Sales rose on the coasts, but fell in the interior sections of the country. Sales rose 16.7% in the Northeast and surged 54.3% in the West, but plunged 26.1% in the Midwest and declined 10.8% in the South. The median sales price was $204,700, a 1.2% decline from a year ago, but better than the 4.8% year-over-year decline recorded in July.

Housing Sector's Problem: Too Few New Jobs

August's new home sales report shows a U.S. housing sector that does not contain enough organic demand to push sales higher in a sustained way.

In addition, the August data also suggests the new home sale market will need at least three quarters, perhaps longer, to return to a normal 700,000-unit to 800,000-unit annual rate.

To be sure, the U.S. economy is capable of returning to new home sales in the 700,000-unit annual range, if adequate, sustained job growth of 175,000 to 200,000 jobs per month occurs, as job creation of that size would increase household formation, sparking demand for housing.

However, so far the expansion has not created anywhere near that many jobs per month, and if that trend continues, housing sales will continue to underperform.

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jhonekate

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July 24 2013 at 1:39 PM Report abuse rate up rate down Reply
Patty

Home sales will not bottom out until 2014 per economists............

September 27 2010 at 4:10 PM Report abuse rate up rate down Reply
Alan

Large numbers of people who would normally be buying homes to move up or to move to new locations are locked out of the industry because they owe more on the home they currently have than they can sell it for. These are the people who bought houses within their means and have too many morals to just walk away. They get no help from this administration because they are not his voting base. He provides help to those who refuse to work, yet refuses to help those who do. I guess this is just the liberal way. Large amounts of money are tied up because of this and will not be available until the redistribution of wealth is done. I see no hope if the current administration is left in power. The only hope is to vote them out. Vote and vote often. The liberals will and will pay others to do the same.

September 27 2010 at 1:56 PM Report abuse +1 rate up rate down Reply
madmax821

No way the recession is over! double dip anyone???

September 27 2010 at 1:50 PM Report abuse +3 rate up rate down Reply
Ralph

There is really nothing new about this article that we don't know already. The housing market is weak right now because of a lack of good jobs. It's all about the money. The lack of good jobs is directly attributed to the real estate crash. We need to get through this and not go crazy with these programs that are wasting the money this government has put aside with our funding. The stimulus plans are ruining our future.

September 27 2010 at 1:41 PM Report abuse +1 rate up rate down Reply
cvdunbar

NO!!!!!!!!!!!!!!!!!!!!!!!!!!! KIDDING. OBAMA AND HIS WIFE ARE TO TIED UP AT THIS MOMENT GRABBING THE CASH FOR LOCAL LOW INCOME SCHOLLS SO THEY CAN SPEND THERE WAY TO SMARTS AND GOOD EATS.

September 27 2010 at 1:18 PM Report abuse -4 rate up rate down Reply
the2431

2011 looks grim, job growth is very slow, no tax cuts.....people are afraid of Politicians (especially Obama) and mood is defensive, so look for little to no growth or expansion in USA. China looks slower also !

September 27 2010 at 1:14 PM Report abuse rate up rate down Reply
Ron Schade

What great event is going to save us from total economic colapse? What miracle is waiting to be launched to save us? What's going to save Social Security now that the baby boomers are starting to collect their benefits? Companies aren't increasing labor. They are still downsizing, and using lower quality materials and processes to stay in business. The quality of life is supposed to improve but you actually make less every year because your raises don't match the cost of living. And what good came out of giving 700 billion dollars of our hard earned money to private companies. Wouldn't the economy have better been stimulated by giving every taxpaying household two to four thousand dollars. People could have caught up on their bills, bought consumer products that would have increase industry and labor. Why don't you hear about that scenario on the news, or talk shows or anywhere. 700 billion dollars of are money given away without our approvsl. This is biggest swindle the government has ever pulled on the American people and we just sit back and let it happen. It's a shame we are not united anymore and let the governnent rule us intsead of the other way around. I do sympatize with Obama becuse he walked into this mess, he didn't create it.

September 27 2010 at 1:13 PM Report abuse +3 rate up rate down Reply
myrrhandco

Gee, we have computers now and books on little flat panels. The building industry is still locked into 1960-something when it comes to building.. . for affordable homes: . . . All walls should be pre-built in standard sizes in a warehouse with power machinery with mass produced parts. Wall would be bolted together on-site in a few hours. The roof should be in standardized roof panels of exact sizes that snap on in sections already covered with new synthetic roofing sheets, (not tar paper covered with paper and glue and beads and stapled on) and the roofing panels will have no holes in it. If damaged, they could be replaced by the original builder or other contractor in just a few hours. All plumbing, vents and exhaust and sunlights would be from the SIDES of the house and NOT put holes all over the roof, seal them with tar so they can shrink and expand in the seasons and then LEAK. No HOLES in the roof. It's just a bad idea. Besides the concrete slab, the roof should be the next strongest and with paper shingles and staples, I don't think so. No air conditioner should be on the roof. It should be in a shaded side of the house on ground level on it's own small concrete pad so it can be serviced at ground level. Most of the price of a house is labor. Labor cannot be recovered and the cost of labor is an invisible part of a home. Labor can be reduced at least 80% by using modern methods of pre-building standard panels in a warehouse, rather than dozens and dozens of men and contractors and sub-contractors all wanting a piece of the pie to drive up the cost of a home and building stick by stick on site, trucking in every little piece. No need for it. The prices of homes now are artificial and should never have been half what they were last year. As the homes went up in value, so did the cheap financing and Realtor's sales commissions drove up prices. You see, each time a home is sold, the Realtor sales commission adds another 5-7% onto the price of the home. If a home is sold 10 times in a year, do you really think it is worth 70% more because of all the sales commissions? Over and over? No. Of course, all the rich people can have whatever they want custom built and whatever they want to pay, but for the rest of us. . . .

September 27 2010 at 12:43 PM Report abuse +7 rate up rate down Reply
8 replies to myrrhandco's comment
chrissf4529

WOW, AND THE EXPERTS AND THE GOVERNMENT SAID THE RECESSION ENDED LAST YEAR. sHOWS HOW OUT OF TOUCH OUR poLITICIANS AND THE PEOPLE THEY LISTEN TOO ARE.

September 27 2010 at 12:38 PM Report abuse +1 rate up rate down Reply