New home sales tumble - Biggest monthly drop in 10 years

http://money.cnn.com/2004/05/26/news/economy/newhomes/index.htm?cnn=yes

New home sales tumble

Biggest monthly drop in 10 years in April as sales sink 11.8 percent from record.
May 26, 2004: 11:07 AM EDT



NEW YORK (CNN/Money) - New home sales posted the biggest monthly drop in 10 years in April, coming in much weaker than Wall Street economists had expected.

The Commerce Department said new home sales fell to an annual rate of 1.09 million last month, down 11.8 percent from the revised record high rate of nearly 1.24 million in March, when mortgage rates were near a 40-year low.

Economists surveyed by Briefing.com had forecast that sales would fall to an annual rate of about 1.2 million.<snip>

But Mark Vitner, senior economist with Wachovia Securities, noted that new home sales are reported when a contract is signed, while existing home sales are reported when the sales closes, usually weeks after a sales agreement is reached. So the new home sales number reflects the impact of rising rates much more quickly. <snip>

n/t

to myself! Uh oh.

The housing market is one of the things that has kept the economy going under during all this insanity.

If that bubble bursts -- we are in deep shit.

People have been taking equity loans based on pumped up value of homes and paying or buying other things...

People have sold over priced homes and used the money either to buy up or buy other stufff...

money that was fueling economy was not from jobs but from home prices that have been over valued.

Made $100,000.00 after 4 years of ownership ....

Paid off EVERY debt I had, and now will be opening a new business next week ....

BTW ? ... we are renting ....

Real estate tumble is starting.

eom

Dow Jones U.S. Real Estate Index Fund (Symbol: IYR).

or is there a double dip coming?

Are you referring to a double dip recession starting in 2000 or this chart. This chart looks like another indicator of the beginning of a descent to me. Nothing goes straight down.

The bear market is continuing and this time the bear is going after the real estate bubble also.

Certainly other indicators might be interest rates going up, personal debt going up, foreclosures going up, etc.

n/t

He told me that Jan & Frb were dismal but that March picked back up to a normal level, now this. He barely made his car payment for Fed & March.

I want to match that up to the information above.

(which is what I think you're referring to) either get paid at the time of the appraisal or they get paid at closing.

He does appraisals

WASHINGTON - Sales of new U.S. homes sagged well below expectations in April to post their biggest monthly drop in more than ten years as rising mortgage interest rates cooled the busy housing market, a government report showed on Wednesday.

Sales of new homes tumbled 11.8 percent to a seasonally adjusted annual rate of 1.093 million units from an upwardly revised record high of 1.239 million in March, the Commerce Department said.

Analysts polled by Reuters were expecting sales to ease to a 1.200 million unit pace.

April's rate was the lowest level of new home sales since November in what is normally the peak season for real estate sales. The decline — the largest monthly drop since January 1994 — could signal the end of a housing boom fueled by the lowest mortgage interest rates since the early 1960s.

http://msnbc.msn.com/id/5067308/

with deficits at all time highs, the Chinese our biggest lender, has got us by the balls

either we keep buying their cheap imports or they pull the plug on buying up our bonds

this is fucked, the republicans are MORONS

If you lose your job, chances are if you don't have a lot of savings that you will not be buying a new home.

parents.

,...explode. That was late last year. Wish I could remember his name.

If you google "housing market bubble" there are a ton of predictions/explanations. Worth reading about, especially if you are planning to buy a home anytime soon. Personally, we're going to be waiting a bit, I think.

for some time now--that the bubble would have to burst sometime, I mean. All along during the latter parts of the boom, foreclosure rates were also at record highs due to people losing their jobs.

CBS Marketwatch last year that basically said buy gold now. Put all your money in gold, and keep it oversees. I might have it saved at home.

I remember a similar article but don't recall that part.

You don't have to be an economist to know that!

pop

in our papers were for people to work at mortgage companies because they needed people to process refinancings and second mortgages. These jobs will start to disappear soon.

so i could process these re-fi's....well, there goes that second job!:-(

equity like there's no tomorrow. A whole lot of people are going to be stuck owing more than their house is worth. Then watch the foreclosure numbers rise.

In my So. Calif. neighborhood there are no more new homes, and the existing ones have reached ridiculous price tags. Anyone paying upwards of 700K for an old stinky fixer is bound to regret it when interest rates rise and they can't get 400K for the thing. Don't understand why banks are approving these deals in the first place.

like never before. Last time we bought a house it almost required offering our firstborne as collateral. When we refinanced the same house 8 years later, they tried to get us to take more money than we wanted. We had the same credit rating and similar income but they were much loser with the money.

Part of the reason is because of the fed gov't underwrites the riskiest loans for banks through FannieMae. This isn't you, but the fact that there are a lot of people father down than you who should be risks but aren't because taxpayers will bail the banks out if they default means the banks can take bigger risks farther up the ladder in the middle class.

Another reason is because consumer debt is such a useful tool for corporate America. It means that big banks get a huge cut of individuals' attempt to live and better themselves economically. It also forces people into accepting a little less. People can't take risks that could result in greater rewards because they're too far into debt. If you have a low paying job but want to start a small business that might compete with your employer's business, forget about it if you're in heavy consumer debt.

All opportunity is then left for people farther up the ladder who can then get cheaper labor from people who are on the hook with debt.


Debt shoots wealth up the ladder and concentrates it in the hands of a few people at the top.

That's why banks like gettting people on the hook with debt.

Just the other day, he said that government policies have been pushing people into home ownership before they were financially ready for it. These people -- basically on the lower end of the middle class -- who are contributing to the spike in foreclosures and bankruptcies that we're seeing right now.

There was a major shake up of management at Freddie durring that drop too
Credit tightened like a drum.

http://www.goodmortgage.com/Mortgage_School/MS_FannieAndFreddie.htm
Who are Fannie and Freddie?

Fannie Mae or Federal National Mortgage Association (FNMA)

Fannie Mae is a private, shareholder-owned company that works to make sure mortgage money is available for people in communities all across America. They do not lend money directly to home buyers. Instead, they work with lenders to make sure they don't run out of mortgage funds, so more people can achieve the dream of homeownership.

Fannie Mae was created by Congress in 1938 to bolster the housing industry during the Depression. At that time, Fannie Mae was part of the Federal Housing Administration (FHA) and authorized to buy only FHA-insured loans to replenish lenders' supply of money.

In 1968, Fannie Mae became a private company operating with private capital on a self-sustaining basis. Its role was expanded to buy mortgages beyond traditional government loan limits, reaching out to a broader cross-section of Americans.
(snip)

You explained that so well. I've been reading about FannieMae issues for a few months now, but what you said really drove it home for me.

drop and there will be nothing anyone can do about it. It's pure supply and demand. The baby boomers are moving through the market and there are not going to be the quantity (fewer buyers) or quality (buyers real income dropping) to sustain growth. I suspect that there will be a glut of homes on the market within the next 5 to 10 years. New expensive homes will sell because those buyers always have the mony but the average buyer will not be buying up. On the other side a big chunk of our equity will vanish and for me so will some of the money I intended retiring on. I am a partner in a house worth over a million and I intend to get rid of it within the next 5 years.

the gen y kids out number the boomers. the number will work out ok in real estate there...

home sales are still booming here.

That said, there are also numerous signs around that are offering "new home for rent," and one wonders if it is someone who is trying to avoid foreclosure or a speculator trying to cash in.

Either speculation building or folks in trouble right after buying a home--those would indicate a bubble on the verge of bursting, not enough "real" demand to keep the industry at the full-tilt it has been running.
We confuse "building" and "buying" at our own risk and someone else's profit.

"this can't last" I bought my present home in 1995 after a divorce in South Minneapolis and paid 82k. Nice neighborhood, cute 1930-50 homes...2 bedrooms unfinished story and 1/2. I've done the bathroom but the kitchen....well, I'm quite sure the HIV virus was born behind the fridge. We're going to gut the kitchen and just had the house appraised for a refi to take some money out. WITH the crappy kitchen my little house appraised at 239k. That's crazy...and the appraisal was done by the credit union which is very conservative. Somethings got to give here....geez.

cashing out of their homes and renting homes until the bubble bursts.

Also, lots of people in their early 20s are expecting the bubble to burst too, and they're waiting.

There are a lot of different perceptions of what's going on.

if i was, i'd sell and cash out like this too. i'd take my money and build a home in the caribbean.

There a LOTS of spec homes that were built, with builders figuring that as long as the interest rates remained low, SOMEONE would buy them. They're finding that's not the case. There are lots of vacant homes in Austin available for rent and/or for sale, and Texas is really cheap for housing compared to other states.

As for So Cal, it's a nice place to visit, but the real estate market just doesn't make sense to me. SoCal is nice, but it's not THAT nice, and the salaries are sometimes a little higher than they are here, but not enough to pay for those houses.

but are afraid to. We keep thinking the bottom is going to drop out, but the houses just keeping more and more expensive. I just have this feeling that if we buy a house now a year from now it will have lost about 20% or so of what we paid for it. But it seems like the longer we wait, the more the new house is going to cost us.

Oh well. Anybody have a crystal ball handy?

:(

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Granted, this isn't going to work for everyone owing to so many different circumstances.

If you are able to, buy a home that is cheap for your income range, or if you have one, keep it. Plan to never leave it. If your work skills allow it, stay in the same house even if you have to change jobs.

My husband and I did this in 1982, and now our house is paid off. We don't care about lower property values because we never intend to sell it. Lower property values mean lower property taxes until they raise the rates. We have also connected with people with whom we are involved in various forms of mutual aid, and hope that can see us through tough times.

:kick: