A couple of days ago we published a post about Yale University economist Robert Shiller predictions for the housing market, and today the government released new report showing that new home sales fell in March to the lowest level in more than 16 years.
March sales came in at a seasonally adjusted annual rate of 526,000, the Census Bureau report showed, down 8.5% from a revised 575,000 in February and down 38% from a year earlier.
Economists were expecting new home sales to decline to 580,000 from the originally reported 590,000, according to estimates compiled by Briefing.com.
New home sales fell despite continued price declines. The median price of a new home sold in March was $227,600, down 10% from $254,000 a year earlier.
All lagging indicators, so is the housing market worse or better than it was in March as we are getting ready to go into May? Unemployment is up in April? Inflation is Up in April (gas prices and energy hit new highs)? Interest Rates up slightly in April? Consumption is down? All these factors except for consumption have an inverse relationship to housing prices. Expect more foreclosures and further drops in housing prices. How long will it continue is the question? Who knows? Very broadly I say we are 1/3 of the way there, simply based on current macro economic trends and active sub-prime lenders. Based on these factors even if the median house price continues to drop there is no reason for the average person or family to take on the biggest financial risk of their lifetime and sink into a mortgage. There is no confidence in the economy.
New Home Sales Hit 16 Year Low – less people (especially family’s) can afford to buy their own home due to luck of available cash flow.
I think that this is just the beginning of the downturn since also many of the house prices are way to high (overpriced – driven up by the investors).
What goes up must come down.
Ed
Think the housing market is worse.
Things should be improving for seasonal factors but they are not.
The only bright note is that inventory of unsold homes reduced very slightly, but that could be from people taking their houses off the market.
Getting a mortgage is going to be another problem altogether.
Bank of America annouced yesterday tighting of their lending requirements (funny now that they bought countrywide) which will make it harder to get a mortgage. So even if your willing to buy a home you may not get the mortgage you need to do so.
Better count on having to put 30% down for a good while from now on.
That’s going to hurt because as you know we are not a nation of savers.
Today’s news “Consumer Confidence Falls to 26 Year Low”, and “Fill Your Hamper, Food Prices up 30 %”. Risk free rate of return on cash, 4 %, and as you said above in country of non-savers, going through a liquidity crisis. Ouch!
You said it