Purchases of new homes in the U.S. fell to an annual pace of 300,000 in May, down 33 percent from April (revised to 446,000) and the slowest pace of sales since records started being kept in 1963. Sales in the west fell 53 percent.
For context, the pace of new home sales in the U.S. peaked at 1,389,000 in July 2005.
Sales of U.S. New Houses Plunges to Record Low as Credit Ends [SocketSite]
U.S. New Home Sales Up 48% YOY As Tax Credits Expire [SocketSite]

Comments from Plugged-In Readers

  1. Posted by lol

    Remove the feeding tube and the patient loses weight! Next is taking him off the Fed’s ventilator (FRE,FNM,FHA,0% Fed rate) and see where the chips fall.

  2. Posted by mwsf

    This won’t affect the real sf.

  3. Posted by Clark

    Does anybody know if these and similar metrics count condo’s or just single family homes? Thanks.

  4. Posted by A.T.

    SFRs.
    http://www.census.gov/const/newressales.pdf
    This is bad news for the economy. Housing generally leads us out of recession (new housing; resales don’t do much). This tax break was an expensive, asinine way to increase housing sales, but look for additional efforts to spur demand. I suspect inventories and months-of-supply will continue to rise, in SF just as elsewhere.

  5. Posted by tipster

    @A.T. They are having trouble just extending the existing one.
    Like stimulus programs everywhere, they don’t really do anything except cost a lot of money and people eventually give up on them. Always works that way and here we are: ready for the next big jump down.
    Whee, it should be a steep, fun ride! Anyone who didn’t get out while the getting out was good will realize what a huge fool they were.

  6. Posted by sfrenegade

    “Next is taking him off the Fed’s ventilator (FRE,FNM,FHA,0% Fed rate) and see where the chips fall.”
    If only that were to actually happen…and let’s repeal the mortgage interest deduction while we’re at it.
    In any case, it appears not to have affected SF because of the CA tax credit.

  7. Posted by Helicopter whats his name

    Man the helicopters, load in the cash in 10s and 20s…fly over the metro areas…dump cash..watch it get into circulation fast..

  8. Posted by mike

    mwsf
    >This won’t affect the real sf.
    from the article:
    > Sales in the west fell 53 percent.
    you’re quite the contrarian.

  9. Posted by ex SF-er

    this is yet another in a long line of “unexpected surprises” that was completely obvious from the get go. only the hacks in the mainstream media were surprised. those of us analyzing the market have known all along that this was gonna happen. All you had to do is look at mortgage applications to see it.
    some may jest, but many people do actually believe that these macroeconomic trends won’t affect SF Real Estate. Of course that line of thinking is weak IMO.
    it’s starting to finally dawn on the Mainstream Media that we are indeed in “the Great Recession”, a necessary adjustment after the great credit bubble of the 2000’s. There is no V shaped recovery (we did have a technical “recovery” but it was more a function of papering over the structural problems in the economy, without addressing the root causes).
    any recovery will be U-shaped if we are lucky, L if we are less lucky, and a double dip has always been a high possibility.
    we have YEARS left to go of this. back in 2007 I used December 2011 as the end of pressure on RE. but given what our response has been, it likely pushes any type of recovery later than that. For a while now I’ve been hoping we have nothing worse than Japans 2 lost decades.
    On a side note, I would like to remind people that the pace of sales in 2005 was just as anomalous as the pace of sales is today, just to the other extreme.
    there is no going back to the “normal” days of 2005 without some way of re-triggering another credit bubble (which our govt is trying its hardest to do). but it faces headwinds too numerous to count on this thread.
    I still think we’ll be lucky to escape a currency crisis after all that we’ve done.

  10. Posted by curmudgeon

    but what to do with money in a currency crisis? But gold, even now?
    I got out. Now where to go?

  11. Posted by A.T.

    Well, didn’t take long for more “stimulus”:
    http://finance.yahoo.com/news/Calif-Fla-other-states-to-get-apf-4192203296.html?x=0&sec=topStories&pos=main&asset=&ccode=
    This is just for show and won’t have any real effect — not even to kick the can down the road like the $8000 deal. I think John Q. Public is now wearying of anything that smells of “bailout” and declines will accelerate. Unfortunate for the economy, but a necessary step to recovering. Much of my work is counter-cyclical so these are boom times around my office, but the high, long-term unemployment is not good from a societal perspective. The saddest thing is we could have been over this by now if they would have cleaned out the garbage on the bank balance sheets two years ago, although it would have been a rough two years.

  12. Posted by Lance

    So, what about sales of all housing (including resales)? Given the huge drop in new construction after years of overbuilding, I don’t find it suprising at all that NEW home sales are at a record low. A much more relevant statistic would be total homes sold/resold, and I also would look at more data than just one month.
    As I’ve said about many other posts on here, this is a limited data point that doesn’t say much of anything about the overall health of the RE market in SF — good or bad. All it does is elicit classless responses such as “anyone who didn’t get out earlier will realize what a huge fool they were”. What’s that old expression about opinions and anal orafices?

  13. Posted by Lance

    Oops…I just saw the other entry about existing homesales. As I suspected, existing sales dropped by a much smaller margin. A drop is a drop, but the two combined is much more useful measure IMO than looking at new sales which are less relevant given the rate of new construction.

  14. Posted by sfrenegade

    “Given the huge drop in new construction after years of overbuilding, I don’t find it suprising at all that NEW home sales are at a record low.”
    Lance, it’s not entirely clear how the sale of new homes relates to housing prices in SF at first glance. However, many people believe that housing starts are a leading indicator for the economy (see Calculated Risk, for example). Many people here have argued that housing prices in SF are at least loosely based the state of the economy as reflected in stock prices.
    Therefore, if housing starts are a leading indicator of the economy, and housing starts are in the toilet, then the economy hasn’t really started recovery yet. That means that housing prices in SF may still drop or at least stay stable for a while, because the stock market, if it’s efficient, should reflect the lack of recovery. Of course, the stock market isn’t efficient, housing prices in SF aren’t entirely based on the stock market, and housing busts take forever to play out, so it’s not a 1:1 correlation by any means.

  15. Posted by ex SF-er

    As I suspected, existing sales dropped by a much smaller margin
    this is due to the lag.
    New Sales are calculated when the contracts are signed. Existing sales are calculated when the houses CLOSE.
    thus, people tend to think of New Sales as more “leading” than existing sales. New sales are also more “important” to the economy because they are more stimulative to job creation.
    the effects of the FTHB credit wearing off are already reflected in the New Sales data for May but NOT in the existing home sales data for May.
    why?
    because in order to take advantage of the FTHB credit buyers had to sign a NEW HOME contract by April 30. Thus, we have the new home sales data from April and May, before AND after the FTHB credit expired.
    however, in order to take advantage of the FTHB credit EXISTING home owners need only close by June 30. Thus, April and May existing sales data both reflect sales that are partially due to the FTHB credit. we have to wait until July data to see the effect of the FTHB expiration on Existing home sales.
    therefore: it was EXPECTED that new home sales would fall off a cliff, and existing home sales would fall, but not as bad.
    it’s not just those two data points though.
    it’s also mortgage purchase applications, which nosedived the week after the FTHB credit expired. People buy houses with mortgages. Mortgage applications continue to plummet. Thus, people aren’t gonna buy homes. (yes yes I know, there are always a few all-cash buyers but they are a minority).
    and it’s not just housing. most of the data is coming in weak. Greece just won’t go away. this was all completely foreseeable except to the shills who are trying to separate the general public from their money. one last fleecing of the sheep. oh, and I guess it’s not foreseeable to our elected officials who have made “extend and pretend” their national mantra.
    but what to do with money in a currency crisis? But gold, even now?
    wish I knew. I’m diversifying. I have assets I own in full, RE, Gold, Treasuries, Oil stocks, cash, precious metals (physical) etc. there likely is no magic answer, and no hiding.
    if you recall a lonnnngggg time ago I used to talk about Ka-POOM. we are still in Ka. No sign of POOM yet. prolly a few years off still.
    when POOM happens I’m dumping all of my dollar denominated asset as soon as possible. but it’s not yet time. (*I’m thinking about farmland if things get really bad).

  16. Posted by dkzody

    Fresno’s home sales for the same time period increased 30+ percent. It’s still all about location.

  17. Posted by Lance

    Ex-sfer and SFRenegade, those are useful responses. Thank you.

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