The sales rate for new single-family homes equaled the lowest rate for that month since September 1996, and sales were down about 23.3 percent compared to the same month last year, the U.S. Census Bureau and the Department of Housing and Urban Development reported today.
The supply of homes for sale in September was 8.3 months, which was the largest supply for that month since September 1990 when it stood at 8.4 months. The months' supply is a projection of how long it would take to exhaust the inventory of for-sale homes at that month's sales rate.
A supply of greater than six months is generally considered to indicate a buyer's market. The supply reached nine months in August.
New homes spent a median 5.9 months for sale since completion in September, which was the highest level for that month since reaching 6.2 months in September 1992. That compares to a median 3.4 months for sale in September 2006.
The seasonally adjusted annual rate of single-family home sales was 770,000 in September, compared with a September 2006 estimate of 1 million. The rate is a projection of a monthly sales total over a 12-month period, adjusted to account for seasonal fluctuations in sales activity.
The median sales price of new houses sold in September 2007 was $238,000, up 4.99 percent compared to the September 2006 median price of $226,700. And the September average price dropped 2.77 percent to $288,000, compared to $296,200 for that month last year.
Regionally, the rate of new single-family homes for sale dropped about 28.9 percent in the South, 28.3 percent in the Midwest, 12.2 percent in the West and 8.1 percent in the Northeast in September compared to September 2007.
The agencies noted that statistics are estimated from sample surveys and are subject to variability and error including bias and variance from response, nonreporting and undercoverage.
Changes in seasonally adjusted statistics often show irregular movement, according to the report, and it can take five months to establish a trend for new houses sold. The new-home sales survey is primarily based on a sample of houses selected from building permits, and a sale is defined as a deposit taken or sales agreement signed.
The preliminary seasonally adjusted estimate of total sales is revised about 4 percent, the agencies reported.
source: 25oct2007
NEW YORK — The latest reading on the state of the battered market for new homes was pretty bad. Experts say it's even worse than it appears.
New home sales in September came in at an annual pace of 770,000, according to the Census Bureau report Thursday. That's up from the revised 735,000 rate in August, but it's down from the original August reading and just below the forecast of economists surveyed by Briefing.com, who had been looking for sales to slow to a pace of 775,000 in the month.
But the report showed more weakness than the narrow miss of the forecast would indicate. Both the pace in July and the pace in August were revised lower. The previous reading of an 835,000 sales pace in July was cut to 798,000, while the original August reading of 795,000 was cut 8 percent to an 11-year low.
The September reading is also down 24 percent from year-earlier levels.
Late July and much of August saw a meltdown in mortgage securities, which made it very difficult for buyers to get financing. The problem in the mortgage market was a key reason that economists speaking at a National Association of Home Builders construction forecast conference on Wednesday said they don't expect sales to hit bottom until spring 2008 at the earliest.
David Seiders, chief economist for the builders' trade group, said Thursday that the latest report has some questionable readings, including a 38 percent rise in sales in the West, which he expects will be revised significantly lower in subsequent months. Without that reported increase, sales would have fallen from the already weak revised level in August.
Seiders also pointed out that the report does not capture cancellations by buyers who were unable to get financing or had to pull out of sales because they couldn't sell their homes.
"We saw an upsurge in cancellations in August and September, according to all the builders," he said. "The net sales, if we could get that number, would clearly be weaker than this. It's too early to get hopes up on this report."
The report did show some slight narrowing of the glut of new homes on the market, as the supply narrowed to an 8.3-month supply from a nine-month supply in August. But that was due to a reduction in homes not yet started or under construction that were on the market. The supply of completed homes reached a record 185,000 in September, while the median number of months it takes a builder to sell a completed new home rose to 5.9 months from 5.8 months in August.
The one sign of some strength in the report is that the median price of new home sales was up about 5 percent from year-ago levels to $238,000.
But that reading does not take into account the incentives builders are offering buyers, such as picking up closing costs or adding extra features for free. The sales price in the report is not adjusted for the value of those incentives. The price reading can also be affected by the shift in sales geographically, such as the questionable pick-up in sales in the West, where prices are more expensive than in some other markets.
"These price numbers are just about useless," said Seiders. "Price cuts are widening and deepening. We know that."
Other economists agreed that Thursday's report also suggest the market has yet to hit bottom, despite the slight uptick.
"Dream on," said Bill Hampel, chief economist for the Credit Union National Association, when asked if the narrow improvement in sales could be the early sign of an improvement in housing. "This is not the turnaround. New home sales are just more than half of where they were at the peak, and we're 25 to 30 percent below what would be considered a normal market." He said it would take two or three years to return to that point.
The downturn in housing has hammered the results of the nation's largest builders.
On Wednesday, Pulte Homes (Charts, Fortune 500) reported a much bigger than expected loss in the most recent quarter. Ryland Homes (Charts, Fortune 500) also reported a loss, while rival Centex disclosed that it had cut prices on some homes by 15 to 20 percent in order to try to maintain sales, as well as cutting staff by more than 40 percent. The day before Centex (Charts, Fortune 500) had reported a large second quarter loss.
In addition, leading home builder D.R. Horton (Charts, Fortune 500) reported last week that its fiscal fourth-quarter orders fell 39 percent, while the value of those orders plunged 48 percent. Credit rating agency Moody's downgraded the debt of Pulte, Centex and Lennar (Charts, Fortune 500), the nation's No. 1 builder in terms of revenue, into junk bond status earlier this month.
source: 25oct2007
NEW YORK — The battered markets for real estate and home building still have farther to fall, according to a range of economists who spoke Wednesday at a forecast conference sponsored by the National Association of Home Builders.
The economists agreed that the problems with home finance markets will continue to hit housing into next year, and that even when there is a recovery, it will be a slow process that will see weakness continue into 2009.
While most said they believed the overall U.S. economy can weather the housing downturn, several saw significant risk of a recession. Mark Zandi, chief economist of Moody's Economy.com, said that large areas of the country will fall into recession, if they haven't done so already.
The economists also admitted to being surprised by how bad the housing downturn has become, and all said that making forecasts of a recovery is difficult due to the problems in the credit markets.
"This time, we just don't know how it's going to pan out because the securities markets have become so much more important," said David Seiders, chief economist with the builder's trade group.
The conference was held in Washington, D.C., on Wednesday, as another trade group, the National Association of Realtors, was reporting the lowest pace of existing home sales since it started using current measures to track those sales since 1999. The sales of existing home sales slowed to the slowest pace since 1998, while the supply of homes on the market rose to its highest level in 12 years.
Zandi estimated that the excess inventory of homes on the market is close to one million, and he added that the glut could get worse if mortgage defaults and foreclosures increase, as it now appears they will.
"We're awash in inventory," he said. "I don't think this [credit] crisis is over. It's less stark than it was four to eight weeks ago. But I wouldn't be surprised if the embers which are smolder catch on fire again."
Thomas Lawler, a former Fannie Mae official who is now a private housing and finance consultant, said the easy financing terms of the boom years have been replaced by an overly restrictive lending environment. But even when underwriting standards return to more normal conditions, it won't be enough to lift demand and prices back to peak levels, he added.
"There's a part of the mortgage market that is gone for at least a while, and it should be because it should never have been there," Lawler said. "But that will slash demand. If the pace of building doesn't continue to fall, we'll see even worse price declines." He's now projecting prices down another 6 or 7 percent next year, on top of declines of that amount this year.
"The fact that building wasn't cut as early as it should have been is one of the reasons that that prices continue to fall," he said.
Still, Michael Moran of Daiwa Securities said he puts the chance of a recession at only about 30 percent, as employment and income should stop the housing market from going into a free fall.
"I think it's a blow the economy should be able to absorb," he said. "The housing prices are holding up reasonably well. If you look at the traditional determinants of housing demand, they're not that bad."
And Bernard Markstein, a National Association of Home Builders economist, said that the fact that home building isn't seen as coming back to 2005 levels or even 2006 levels for the foreseeable future isn't a bad thing.
"The real comparison should be to 2002 to 2003, back when we were meeting our needs, not to 2004 or 2005," Markstein said. "That's when we were overbuilding - we don't want to be there."
source: 25oct2007
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