OK, you know the gruesome numbers on new home sales. Sales down to a SAAR of 300,000 – the lowest number recorded since 1962 when the statistic started to be tracked. March and April sales revised substantially lower and months of supply zooming from 5.8 in April to 8.5 in May.
From Calculated Risk, here’s the carnage in graphic form (click for larger image). Note how atypical the recovery in new home sales or rather lack thereof is compared to previous recessions.
You’ve heard that the collapse stemmed from the end of the homebuyer tax credit as whatever demand that existed in the market was simply pulled forward into the period in which the credit applied. Also, the downward revisions to the March and April numbers might well indicate that demand was not as strong as originally thought.
So, any rays of light here? Well, maybe.
If the politicians can keep their hands off, then we might well look back at this at the true bottom of the market. The subsidies that have been thrown at the housing market have prevented that discovery and, perversely, might well have held down real organic demand. Potential buyers who could look beyond the immediate gratification of a free $8000 may have viewed buying in during the subsidy phase as buying in the midst of just another bubble, this one overtly courtesy of the feds.
It might take a few months, maybe longer and prices in some markets are likely to take another hit, but if buyers begin to sense that there isn’t going to be any more backsliding and aren’t barraged with media discussion of the artificial demand created by government programs, they might begin to believe that a new home represents a good use of their money. Few if any markets function normally if participants have a sense of instability and uncertainty. Nothing so creates such an environment as do subsidies.
Let’s hope that we turn a corner here and admit that the housing market needs to start walking on its own. It’s pretty clear that gobs of money can’t put Humpty together again. Time and a little inattention might however get the job done.