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http://www.bloomberg.com/news/2010-06-23/sales-of-u-s-new-houses-plunge-to-lowest-level-on-record.html

Sales of U.S. New Houses Plunge to Lowest Level on Record

By Shobhana Chandra and Timothy R. Homan - Jun 23, 2010

Purchases of U.S. new homes fell in May to the lowest level on record after a tax credit expired, showing the market remains dependent on government support.

Sales collapsed an unprecedented 33 percent from April to an annual pace of 300,000, less than the median estimate of economists surveyed by Bloomberg News and the fewest in data going back to 1963, figures from the Commerce Department showed today in Washington. Demand in prior months was revised down.

Stocks dropped and Treasuries rose as the report added to signs of weakness in the economy, including a decline in retail sales and a slowdown in private job growth. A lack of inflation and concern over unemployment and housing are among reasons Federal Reserve policy makers today are likely to renew a pledge to keep interest rates near zero for an “extended period.”

“May was a bad month for the economy,” J. Alfred Broaddus, former Richmond Fed president, said in an interview on Bloomberg Television’s “In Business With Margaret Brennan.” When the Fed releases its policy statement today, its language on the economy will be “markedly more pessimistic,” he said.

The Standard & Poor’s 500 Index fell 0.6 percent to 1,088.74 at 11:51 a.m. in New York. The yield on the 10-year Treasury note fell to 3.12 percent from 3.17 percent late yesterday.

Exceeds Drop Projected

Sales were projected to drop 19 percent to a 410,000 annual pace, according to the median estimate of 76 economists surveyed. Forecasts ranged from 300,000 to 530,000. The government revised April’s purchase rate down to 446,000 from a previously reported 504,000.

The median price decreased 9.6 percent from the same month last year, to $200,900, the lowest since December 2003, today’s report showed.

Purchases dropped in all four U.S. regions last month, led by a record 53 percent decrease in the West.

The supply of homes at the current sales rate jumped to 8.5 months’ worth from 5.8 months in April. There were 213,000 new houses on the market at the end of May, the fewest since 1970.

The reduction in inventory puts builders in a better position to deal with the slump in demand than when housing peaked in 2005, said Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd. in Valhalla, New York. There were a record 572,000 new houses for sale in July 2006, one year after sales reached the highest point.

‘Grim’ Outlook

“We see no chance of a quick, sustained recovery, though we are hopeful there is little further downside,” Shepherdson, who correctly forecast the drop in sales, said in a note to clients. “We expect the very favorable affordability picture to start pulling people back into the market, but the next few months are likely to be very grim.”

The data come on the heels of a report from the Labor Department this month that showed companies hired 41,000 workers in May, fewer than forecast and the smallest gain in four months. Figures from the Commerce Department showed purchases at retailers dropped in May for the first time in eight months.

Housing’s role has shrunk so much that a renewed slump will do less damage to the world’s largest economy, said Jay Feldman, an economist at Credit Suisse in New York. Residential construction accounts for a record-low 2.4 percent of gross domestic product, down from 6.3 percent when the boom peaked in 2005, he said.

Housing’s “capacity to do the portfolio of GDP activities marginal harm going forward is greatly diminished,” Feldman said in a note to clients.

Housing Slump

Other data confirm the market is stumbling. Sales of existing homes, housing starts, building permits, builder confidence and mortgage applications have all declined.

The S&P Supercomposite Homebuilder Index, which includes Toll Brothers Inc. and Lennar Corp., has dropped 28 percent through yesterday since reaching a 19-month high on May 3. The broader S&P 500 Index is down 10 percent from April 23’s 19- month peak.

Builders are also concerned that the Gulf oil spill and European debt crisis are hurting buyer confidence. Toll, the largest U.S. luxury homebuilder, said deposits have been running 20 percent behind the year-earlier period the past three weeks.

“Concerns about the financial crisis in Europe and escalating regional political tensions, coupled with worries about the oil spill in the Gulf of Mexico and its effects on the economy and the environment have negatively impacted the outlook of American consumers,” Joel H. Rassman, chief financial officer at Horsham, Pennsylvania-based Toll, said in a June 16 statement.

Hovnanian Enterprises Inc., the largest homebuilder in New Jersey, said orders fell 17 percent in the quarter ended April 30 from a year earlier, and contract signings slowed in May, indicating the tax credit helped pull some sales forward.

To contact the reporters on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net; Timothy R. Homan in Washington at thoman1@bloomberg.net

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Also heard yesterday from a friend of mine that works for a large mortgage lender that they are scrambling like crazy to try and get the loans finalized for the people that went under contract prior to the 4/30 expiration, yet still have to settle before 6/30 to qualify for the credit.

He indicated (and of course he can only speak for his local branch office) that it wouldn't suprise him if they are unable to get a large % (non-specific) of the loan packages to the settlement table on or before 6/30.

If that does occur, it wouldn't suprise me to see a large number of those "tax-credit buyers" withdraw their offers, causing the housing numbers from April to have to be revised even lower. :2cents:

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What a shock. When a subsidy ends, sales slow.

(Especially since, no doubt, a lot of buyers rushed to close a deal before the subsidy expired, thus inflating the figures for the previous month.)

What the number is, 3-4 months from now, will be a bigger indication.

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I'm trying to sell my house. We haven't had anyone come look at it in over a month (save for an open house that brought in 3 people). Typical American attitude nowadays. They want something for nothing. Everyone is expecting the government to support them in buying a house. They want a good house at foreclosure prices. Eff you!. I'm not coming down on my price beyotch.

We bought the house for 132K 4 years ago. It's valued at $135K. We're asking for $139K because we put in all hardwood floors and made some significant upgrades. I can come down to $135K without taking a loss, but only one offer has been made and they asked for $126. That would put my in the minus if I sold it for that.

What the hell is wrong with people? I bought the house on my own credit score (my wife was not a citizen and had no credit at that point), my own salary and I didn't even go through a first time buyer program. I just saved money and did it myself.

These bailouts and extensions on unemployement have made this country a bunch of lazy, government relying SOBs. If we don't sell it in the next month, we'll pull it off the market, refinance it and add on to the back to make it bigger. It's a starter home and it is priced right for the area and the size of the house. Hell, I might as well throw the keys in the driveway with a sign that says "house for free" on it.

Get off your asses America and stop relying on the government to bail your sorry asses out. Pull your bootstraps up, get a 2nd job or sell crack for extra money. I don't care, but my house is not for free. I don't HAVE to sell. I want to, to move into a bigger home, but I'm not desperate to sell.

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I'm trying to sell my house. We haven't had anyone come look at it in over a month (save for an open house that brought in 3 people). Typical American attitude nowadays. They want something for nothing. Everyone is expecting the government to support them in buying a house. They want a good house at foreclosure prices. Eff you!. I'm not coming down on my price beyotch.

We bought the house for 132K 4 years ago. It's valued at $135K. We're asking for $139K because we put in all hardwood floors and made some significant upgrades. I can come down to $135K without taking a loss, but only one offer has been made and they asked for $126. That would put my in the minus if I sold it for that.

What the hell is wrong with people? I bought the house on my own credit score (my wife was not a citizen and had no credit at that point), my own salary and I didn't even go through a first time buyer program. I just saved money and did it myself.

These bailouts and extensions on unemployement have made this country a bunch of lazy, government relying SOBs. If we don't sell it in the next month, we'll pull it off the market, refinance it and add on to the back to make it bigger. It's a starter home and it is priced right for the area and the size of the house. Hell, I might as well throw the keys in the driveway with a sign that says "house for free" on it.

Get off your asses America and stop relying on the government to bail your sorry asses out. Pull your bootstraps up, get a 2nd job or sell crack for extra money. I don't care, but my house is not for free. I don't HAVE to sell. I want to, to move into a bigger home, but I'm not desperate to sell.

You shouldve taken the 126 and run. Either that or not plan to sell for a very long time.

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I'm trying to sell my house. We haven't had anyone come look at it in over a month (save for an open house that brought in 3 people). Typical American attitude nowadays. They want something for nothing. Everyone is expecting the government to support them in buying a house. They want a good house at foreclosure prices. Eff you!. I'm not coming down on my price beyotch.

We bought the house for 132K 4 years ago. It's valued at $135K. We're asking for $139K because we put in all hardwood floors and made some significant upgrades. I can come down to $135K without taking a loss, but only one offer has been made and they asked for $126. That would put my in the minus if I sold it for that.

What the hell is wrong with people? I bought the house on my own credit score (my wife was not a citizen and had no credit at that point), my own salary and I didn't even go through a first time buyer program. I just saved money and did it myself.

These bailouts and extensions on unemployement have made this country a bunch of lazy, government relying SOBs. If we don't sell it in the next month, we'll pull it off the market, refinance it and add on to the back to make it bigger. It's a starter home and it is priced right for the area and the size of the house. Hell, I might as well throw the keys in the driveway with a sign that says "house for free" on it.

Get off your asses America and stop relying on the government to bail your sorry asses out. Pull your bootstraps up, get a 2nd job or sell crack for extra money. I don't care, but my house is not for free. I don't HAVE to sell. I want to, to move into a bigger home, but I'm not desperate to sell.

:ols: :ols: :ols:

So, just to be clear, the fact that the market is pricing your house lower than you would like is evidence that America has turned into a lazy Communist state. Am I understanding that correctly?

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Get off your asses America and stop relying on the government to bail your sorry asses out. Pull your bootstraps up, get a 2nd job or sell crack for extra money. I don't care, but my house is not for free. I don't HAVE to sell. I want to, to move into a bigger home, but I'm not desperate to sell.

How about we pay people enough that they can afford to work one job, have their spouse stay home with the 2 kids, and still be able to afford to buy reasonable housing.

You know, like they did 35 years ago.

:evilg:

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LMAO at pjfootballer.

Anyway, is anyone surprised by this? Anyone that was in the market would have definitely tried to get their **** together before the deadline. It will probably be extremely slow for a few months but after that will be a better indicator of the actual status of the market.

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I'm trying to sell my house. We haven't had anyone come look at it in over a month (save for an open house that brought in 3 people). Typical American attitude nowadays. They want something for nothing. Everyone is expecting the government to support them in buying a house. They want a good house at foreclosure prices. Eff you!. I'm not coming down on my price beyotch.

We bought the house for 132K 4 years ago. It's valued at $135K. We're asking for $139K because we put in all hardwood floors and made some significant upgrades. I can come down to $135K without taking a loss, but only one offer has been made and they asked for $126. That would put my in the minus if I sold it for that.

What the hell is wrong with people? I bought the house on my own credit score (my wife was not a citizen and had no credit at that point), my own salary and I didn't even go through a first time buyer program. I just saved money and did it myself.

These bailouts and extensions on unemployement have made this country a bunch of lazy, government relying SOBs. If we don't sell it in the next month, we'll pull it off the market, refinance it and add on to the back to make it bigger. It's a starter home and it is priced right for the area and the size of the house. Hell, I might as well throw the keys in the driveway with a sign that says "house for free" on it.

Get off your asses America and stop relying on the government to bail your sorry asses out. Pull your bootstraps up, get a 2nd job or sell crack for extra money. I don't care, but my house is not for free. I don't HAVE to sell. I want to, to move into a bigger home, but I'm not desperate to sell.

translation: boo hoo

people make purchases (and all other decisions) based on CURRENT information. Al that past information you cite is useless. If you are selling, then the value of your house is the amount that somebody ELSE is willing to pay for it. period. what YOU think they SHOULD pay for it matters less than the gallons of pee floating off the coast of Ocean City on a warm August day.

Other people's unwillingness to overpay you for your house based on the current market has nothing to do with laziness or unwillingness to engage bootstraps. get over it and quit being such a victim.

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How about we pay people enough that they can afford to work one job, have their spouse stay home with the 2 kids, and still be able to afford to buy reasonable housing.

You know, like they did 35 years ago.

:evilg:

One of the dumbest U.S. economic policies has been the push for full employment . . .

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I was one of those people who bought right at the beginning of the tax credit but was oblivious to it until about 2 weeks into looking our realtor said "Oh by the way are you 2 going to use your tax credit for buying the house on the downpayment?" We both just kind of blankly stared at her because we had no idea what she was talking about. We had saved enough for the downpayment and closing costs without the government's help. Not that I'll be complaining in a month or so when that check comes in.

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I was one of those people who bought right at the beginning of the tax credit but was oblivious to it until about 2 weeks into looking our realtor said "Oh by the way are you 2 going to use your tax credit for buying the house on the downpayment?" We both just kind of blankly stared at her because we had no idea what she was talking about. We had saved enough for the downpayment and closing costs without the government's help. Not that I'll be complaining in a month or so when that check comes in.

I saved enough for the downpayment on my house and closed a month or two ago.

I didn't "need" the tax credit but it will allow me to update the kitchen.

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Interesting...my wife and I are looking to buy a new house in 3-4 years. We were planning on renting our current townhouse out, rather than selling it. Anyway, I wonder how long this downturn is going to last. If it keeps up for 3-4 years, the prices could be very attractive when it's our time to buy.

No offense to PJ and others, but I'm somewhat excited by the prospect of being able to buy either more house, or a house in a nicer area, that I otherwise might not have been able to manage.

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Something a friend of mine told me I found pretty interesting. He's been trying to refinance his mortgage for a while now, but it has been very slow going despite the fact that he has good credit. He thinks that unless you are getting government assistance of some sort, banks are still not lending money. I don't know the truth of the matter, but it certainly would contribute to the lack of sales.

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Something a friend of mine told me I found pretty interesting. He's been trying to refinance his mortgage for a while now, but it has been very slow going despite the fact that he has good credit. He thinks that unless you are getting government assistance of some sort, banks are still not lending money. I don't know the truth of the matter, but it certainly would contribute to the lack of sales.

When you've just gone through a decade of bubblicious mortgage practices, the return of "normal" lending standards can seem an awful lot like "the banks aren't lending money."

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that is total baloney.

lenders have tightened their lending standards, so now you need BETTER credit than you did before (and better income and/or down payment to loan rations)

govt programs don't cause that bank conservatism, it mitigates it a little, but only on the margins.

on the other hand, demand may stay somewhat depressed if potential buyers believe that there will be more and better governemnt programs in the future to hold out for.

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that is total baloney.

lenders have tightened their lending standards, so now you need BETTER credit than you did before (and better income and/or down payment to loan rations)

govt programs don't cause that bank conservatism, it mitigates it a little, but only on the margins.

on the other hand, demand may stay somewhat depressed if potential buyers believe that there will be more and better governemnt programs in the future to hold out for.

If I'm a bank, I'm probably not going to be wild about lending money when interest rates are so low. Why would I lend now if my potential for return is much greater down the road? This is why I was not in favor of TARP. If I have money now, I'm trying to consolidate my own financial situation and aquire as much as I can at bargin prices. If I can afford to wait it out, I can make a whole lot of money. Besides, banks don't make money lending to private home buyers. They make money lending money to other banks.

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You shouldve taken the 126 and run. Either that or not plan to sell for a very long time.

I'd owe them money if I took the 126. We have alternatives. Like I said, we might refinance, stay a couple of more years and add on.

:ols: :ols: :ols:

So, just to be clear, the fact that the market is pricing your house lower than you would like is evidence that America has turned into a lazy Communist state. Am I understanding that correctly?

Did I even mention communism? The market is not pricing my house lower, the people are. The house is worth 135, I'm asking for 139 and can go as low as the value of the house. People are trying to lowball to get something for nothing.

How about we pay people enough that they can afford to work one job, have their spouse stay home with the 2 kids, and still be able to afford to buy reasonable housing.

You know, like they did 35 years ago.

:evilg:

Things change and so has the price of everything. My wife has to work because I don't make enough (we could survive if she didn't work, but we'd have to sacrifice alot) money to pay all of our bills. Go ahead and keep paying people $35 an hour to screw in a bolt and keep paying 40 grand for your car. It will go up to 50 grand. I won't pay more than 20 grand for any vehicle.

LMAO at pjfootballer.

Anyway, is anyone surprised by this? Anyone that was in the market would have definitely tried to get their **** together before the deadline. It will probably be extremely slow for a few months but after that will be a better indicator of the actual status of the market.

I'm not expecting to make a killing on the house. I just want to break even or make around $2k off the house. It was a starter house. I know the market is not great right now and it should pick up. Like I said, I have alternatives. I'm not desperate to sell, but I'd like a "Fair" offer. The house was not ready to be put on the market during the incentive period. I wish it was, but I couldn't get all the work done in time.

Is it too much for me to ask for a small profit on the house? I'm not asking for a kings ransom. I'll probably only make about $2K on the house if I sell it at value. I understand that you usually make the money off your second house.

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when the market is working well, the banks are indifferent between the short term, relatively low risk, and relatively low return loan to other banks versus the longer term relatively riskier and higher return home loan... the different interest rates are set BY the different attitudes to the different risks.

there is a bit of crud (and more uncertainty about the future) gunking things up right now... which leads to banks being extra conservative.

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translation: boo hoo

people make purchases (and all other decisions) based on CURRENT information. Al that past information you cite is useless. If you are selling, then the value of your house is the amount that somebody ELSE is willing to pay for it. period. what YOU think they SHOULD pay for it matters less than the gallons of pee floating off the coast of Ocean City on a warm August day.

Other people's unwillingness to overpay you for your house based on the current market has nothing to do with laziness or unwillingness to engage bootstraps. get over it and quit being such a victim.

Well, the taxes I pay to South Carolina would differ with you. They tell me it's worth 135, I'm not selling it to someone else's price. I'm not asking them to overpay. If I was selling it at 170, then you got me. I'd be asking for way too much. I'm asking 139 (and there are other houses similar to ours in size/model in the neighborhood that are asking around the same) and I have wiggle room to come down to 135-132 range. I'm not dead set on 139. I'm not dead set on that price. Just a fair offer.

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Something a friend of mine told me I found pretty interesting. He's been trying to refinance his mortgage for a while now, but it has been very slow going despite the fact that he has good credit. He thinks that unless you are getting government assistance of some sort, banks are still not lending money. I don't know the truth of the matter, but it certainly would contribute to the lack of sales.

Maybe he is trying to refinance at a price at more than what the bank now values the house? That hurt a lot of people when the housing market prices took a dive.

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Did I even mention communism? The market is not pricing my house lower, the people are. The house is worth 135, I'm asking for 139 and can go as low as the value of the house. People are trying to lowball to get something for nothing.

Those ****s. Trying to get a lower price out of you? How dare they?!?!?!

Seriously, that's one of the dumber things I've ever read here.

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