Wikinvest Wire

New home sales reach new record lows

Wednesday, February 24, 2010

The Census Bureau reported(.pdf) that new home sales reached a new record low last month, down 11.2 percent from 348,000 units in December to just 309,000 units in January, in what looks to be the beginning of another very difficult year for the homebuilders.
IMAGE The level of new home sales last month came in below the prior record low of 329,000 reached in January 2009, a full 78 percent below the peak level of sales in 2005.

Even more astonishing is the fact that the pre-2009 record low of 338,000, seen in September of 1981, works out to be about 406,000 when adjusted for population growth, meaning that the January new home sales level could rise by about 31 percent next month and still only reach the pre-2009 population-adjusted record low.

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simplesimon said...

A news headline below this post says housing starts increased in January.

I read the linked article and it says that builders are counting on the tax credit expiration (4-30-2010 at the moment) to boost sales because builders are betting 'on the Spring Tax Credit.'

However, the article also notes that it takes 4-6 months to build a house and the closing must be by 6-30-2010 to qualify for the tax credit. (So, I'm guessing closing won't or can't happen until construction is complete.)

Four months before 6-30-2010 is about 3-1-2010 (depending on exactly how they count 'months').

That means buyers who want the credit have until early next week to buy a 'new' home.

It's hard to believe there will be a surge of new home buyers over the next 4-5 working days (including today) sufficient to justify this INCREASE in the supply of new homes.

This seems especially true given today's news of record LOW sales of new homes in January.

Am I missing something?

Did the builders make a huge mistake in 'betting on the tax credit' or does this just signal that Congress will extend the tax credit yet again?

At this point, it appears Congress will try anything to keep the real estate market artificially inflated so it wouldn't surprise me at all.

Anonymous said...

Its all about the price. The local paper this morning had an article about a local builder wanting to build homes in the $200,000 to $300,000 range, but the burb would only agree to let them build $400,000 and up homes.

Joe average cannot afford to buy these monstrosities. Which limits the market to the top 20% of the population. Few high end homes are selling to the bottom 80%? What a surprise. Who could have guessed that this would happen.

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