Monday, September 26, 2011

New Home Sales Fall Again



The Commerce Department announced today that new home sales fell again for the fourth straight month to a new six-month low in August 2011.

What is crucial to note in the Commerce release is this startling statistic.

With a seasonably adjusted annual rate of merely 295,000 new home sales, the United States is LESS THAN HALF from the number of homes that must be sold merely to sustain (and not grow) a healthy housing market.

The U.S. needs to sell at least 700,000 new homes a year.

At best, this year new home sales may top 300,000.

I have been reporting in this blog for YEARS now that an improvement in the new home sector will not happen before 2015 and this figure is optimistic.

The news gets worse.  Prices of new homes are still falling, down another 9% over the last year.

So with near historically low mortgage interest rates and sharply falling prices, new home sales rates are steadily declining and even failing to keep pace with normal market demand forces needed to sustain a healthy market.

New home sales figures have fallen for FIVE straight years.

2011 is appearing to be #6.

What is the Federal government's response to this crisis?  So far, almost nothing.  But watch this video from Australia on what some "activists" are proposing for the new homes sales catastrophe in their country.  It is just a matter of time before similar calls go up in the United States, especially in an election year like 2012.