The housing bottom has clearly been reached... new home sales surged in July

http://www.cnbc.com/id/32565315




This... more than anything... will lead the recovery.


New homes have an amazing stimulative effect on the economy. Builders, lumberyards, brickworks, glassworks, etc. all see a jump in revenue.

Then... new homes need furniture... so that stimulates the economy further. And furniture makers need more textiles, which further stimulates the economy.

You want a return to job growth? It begins with new home sales.

Interesting...

I don't think you are, I think this is a little bounce before the bubble collapses. But I can hope you're right. :hi:

Rec'd because I don't see why not.

Sellers of existing home are having a big problem selling; the credit is not available for home purchasers. Also, banks have a big inventory of foreclosed properties.
I just don't see a big surge in new homes right now. However, it would be nice because of all the jobs new building would generate.

Double Plus Good.

K&R anyway.
I'll grasp any straw within reach this morning.

I can tell you from personal experience how helpful that was. We just bought a new house, and have used 2000ish of the credit buying furniture and the various things you need in a new house (lawn equipment, etc), plus, we laid 2000 of it onto our car principal. Lots of companies got to share in our refund, plus we will have a little cushion for the various unexpected things that can go wrong.

Just on disclosure, we needed to buy a lot of stuff because we just moved back here from overseas, and didn't bring any furniture back with us, and so needed a lot of new stuff.

Or better yet, home-buyers flat out refuse to buy an over-priced, over-inflated-value house in the first place?

that's not overinflated. How much is too much for a house? How do you know? We think we got a great deal on our house.

the strong sales is a good sign, but the shrinking inventory is far more important.

the best thing for the economy would be for the builders to just back off for a while. hey, they pay farmers not to grow, they could have paid developers not to build.

it follows it. Nice try, though.

lol

this uptick is largely due to money made available to first-time home-buyers. And while it will certainly provide a few temporary construction jobs, it will in no way solve the problem.

This is what people seem to be forgetting: The conditions that caused this still exist, although they're being ignored, that doesn't mean they're going to go away.

I would suggest that you prove your contention, if you can, that the FHA assistance, is driving NEW home purchases. new homes are traditionally out of the price range of FHA buyers.

The conditions that created the initial collapse still exist. The rest is superfluous.

This is my opinion. You are, of course, entirely entitled to yours.

The conditions that created the initial collapse are gone. Unless of course you are refering to the environment in which they formed, e.g. banking regulation, which has only changed some. In effect, the collapse was caused by Bush policies.

of their assets? Yeah, gee, I seemed to have missed that.

23 Trillion in CDO and CDS vehicles still floating around out there, but all is well.


Mortgage foreclosures and bankruptcies are breaking records, but all is well.

Banks are still failing every week.

The workforce is still shedding jobs...

And oh yeah, we've added a few trillion to our deficit. How could I have been so silly. :eyes:

These items are not peaking, they are in FACT slowing. Frankly, im proud of the fact that Obama was willing to put some debt on the books to float the economy. Banks are lending again, housing sales both existing and new have increased, orders for durable goods are up. the economic decline is slowing.

what exactly did you expect would happen in an recession?

I really do hope that you are right and I am wrong. Really. :)

Still, if it's all the same to you, I'll continue my push for individual autonomy.

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just sayin'...

Most of the surge we're seeing today is caused by buyers who had been previously been priced out of the market. Where I live, the median home price was $350,000 just a few years ago. It's around $150,000 today. An individual with a consistent wage who was unable to purchase a home just three years ago is now in a position to purchase, with no other changes to income or economic status.

What you said is true in a normal market, but the rules change in a deflationary market. The only constant is that new home sales require an influx of new buyers. Normally that's achieved by growing jobs, to raise individual incomes to a level where they can begin to afford a new home. In deflationary markets, new buyers can also be introduced to the economy by reducing prices so that existing wage levels are brought into the range of affordability.

It's the second option that we're seeing today. This is a bad thing for the homebuilders (who see reduced overall income), but is good in that it encourages overall growth. The OP was correct in that it also stimulates secondary purchases.

I am stupid with money.

If banks are using the "mark to market" for their
assets, and the "market" they are using has inflated
value from the past 10 years...

Then if the bank forecloses on a home that was
"worth" $500,000 and then considers that $500,000
an asset, then they SELL it for $200,000...

...don't the accounts show a LOSS of $300,000
somewhere?

Help.

Which actually happened last year and the year before. This is the event that triggered the credit crunch. When banks balance sheets went red, they stopped lending.

Right?

Are most banks just holding on to
properties just for their bottom line?

Or is there some new, tricky accounting going on?

The valuation systems used do not average values over the last ten years to determine value today.


New properties would not be selling at a loss as the lending on new construction is far more limited than mortgages.

Cost of construction?

And the only way the bank will book a loss
is if it sells for less than the cost to
build it?

Thanks!

:hi:

The appraiser will simply confirm that the house is plausibly worth the contract amount and pin the value at 5K above.

The bank didn't build the house, a spec home builder or a home owner with a construction loan will. I'm not sure i understand what your driving at here.

There are a TON of new builds around me.

They were built (or partially built)
during the "boom" and have never sold.

At one time, they were valued at MANY
times what the going rate is now.

Many builders have gone belly-up, and the
"new builds" have been taken over by banks.

I am just wondering if we are in a position
where, even if the homes start selling (as
apparently they ARE), the hole is just being
dug deeper for the banks.

Perhaps there are enough builders that are
selling for enough over cost that there is
still a profit being made for someone besides
the real estate agents and appraisers.

Where these house sold or not. If they where not sold, then the bank is only into them for the contruction cost which is sure to be below the current low market value.


If they where sold, then the builders have run off with that cash and the banks posted that lose a couple of years ago during the start of the credit crunch.

Either way, the hole is already dug, selling the house is what the bank needs to do.

Say the bank wrote the note for 20 homes @ 500K each = $10 mil.

The builder goes belly up and the bank owns the homes now. The homes aren't worth anything near $500K. Say they are "worth" $300K. The bank has already written down the $4M in losses.

It doesn't matter if they sell them or hang on to them either way they loss $4M.

However holding the houses hurts 2 additional ways
1) liquidity. houses are not cash. So $6M in houses can't be used as cash reserves (which banks need right now).

2) no cashflow. banks hold notes because it gives them periodic (monthly) income in the form of repayment. If they own the house = no cashflow. Even if the house goes up in value they don't get a check each month.

For that reason banks HATE holding onto property and would rather dump them at $250K (another $1M loss) rather than get into the real estate biz.

i would mention that in this general case, construction lending probably didn't drag the bank into a value deficit as they only loan construction cost, not value. If the homes are worth 300K, then the cost of construction is probably very close to that.

I had wondered if it "looked better" on the
books as an over-valued asset...

maybe keep them from being closed down.

Apparently, the motivation to have money,
ANY money FLOWING is a bigger factor.

Thanks!

The bank can't keep it on the books as an overvalued asset.

Every year the house will be re-assessed for tax purposes. The bank is required to mark the asset down to the new assessment. They can't just ignore the assessment and keep the houses artificially valued higher.

http://www.atimes.com/atimes/Global_Economy/KH27Dj02.html

The bottom 80% of Americans are suffering, their children aresuffering. People's lives and conditions are not getting better. Sooner or later, this produces disaster. The divergence of fortunes was a significant cause of the great crash from 2007-2009.

On August 21, The National Association of Realtors (NAR) released July existing home sales numbers. Existing home sales rose 5% over their July 2008 levels. This increase was led by condo and co-op purchases. Almost one of every three homes sold was sold out of foreclosure or deep distress. The average home price declined by a massive 15% to $178,000 from $210,000. On this news, stock prices soared. Major US indexes added to their recent gains with surges of over 1.25% across Friday, August 21.

Foreclosure rates soared 32% between July 2008 and July 2009. One in every 154 homes in
Florida is in the foreclosure process; one in every 123 homes in California is in the foreclosure process; one in every 56 homes in Nevada is in foreclosure; 361,000 households received foreclosure notices in July 2009. As of May 2009, nearly 35 million Americans were receiving food stamps, a record. Much of this pain is driven by the dismal employment situation.

A recently released study from Bankrate (Bankrate.com, Families and Finance) reveals that more than one in four Americans owes more on their home than it is worth. Falling prices are terrible news for tens of millions of families. A falling rate of unemployment growth is cold comfort for the 247,000 newly unemployed Americans in July. Discounts on new cars and homes don't help those with low credit scores, no jobs and foreclosure notices. These millions can't buy new homes or cars

i wish, like you, they where heading the other way.

sale.

Or, it might have something to do with that $8,000 tax credit for new home buyers that expires in November. Many expect the housing market to cool down when that goes away, since some 30% of new home sales last month were new home buyers.

1. It will give banks some confidence to actually lend money for home purchases.

2. It will encourage buyers to BUY NOW.

http://www.finfacts.ie/irishfinancenews/article_1017477.shtml

For the second month in a row, we’re seeing some positive signs,” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s.“The US National Composite rose in the 2nd quarter compared to the 1st quarter of 2009. This is the first time we have seen a positive quarter-over-quarter print in three years. Both the 10-City and 20-City Composites posted monthly increases, as did most of the cities. As seen in both seasonally adjusted and unadjusted data, as well as the charts, there are hints of an upward turn from a bottom. However, some of the hardest hit cities, especially in the Sun Belt, show continued weakness.”

Still massively below the peak but if we get another qtr of rising prices I would feel confident buyers will be buying at or near the bottom. We could actually get a spike. A second qtr of rising prices + the $8000 stimulus ending may create a rush to buy before missing both boats (low prices + $8000).

Sales look like they're recoving (with all the ancillary benefits) but there's still a lot of inventory comng on the market so prices will probably remain stagnant (although in my book, that's not a bad thing). You might be interested in this: http://www.economist.com/businessfinance/displaystory.cfm?story_id=14258851