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The news from the housing market has been consistently bad for the last few months. There has been no good news -- not one piece that could indicate the market is approaching the bottom. In short, we're still nowhere near the bottom.
New Home Sales Drop 6.6%
Here's a link to the Census report.
From Bloomberg:
Purchases of new homes in the U.S. dropped more than forecast in June, signaling no end to the real- estate slump that's weakened the economy.
Sales fell 6.6 percent, the most since January, to an annual pace of 834,000 last month from a revised 893,000 rate the prior month that was less than previously estimated, the Commerce Department said today in Washington.
Builders may have to cut prices even more and sweeten incentives to turn sales around and trim bloated inventories. Rising mortgage rates and stricter rules to qualify subprime borrowers with poor credit histories will extend the worst housing slump in 16 years and continue to slow growth.
``The subprime debacle is definitely hurting,'' said Zoltan Pozsar, senior economist at Moody's Economy.com in West Chester, Pennsylvania, whose forecast matched the lowest at 850,000. ``This points to further construction drag on growth.''
The South -- which is the biggest region -- saw an increase of 7.6%. This was the only region with good news. The Midwest dropped 17.1%, the West dropped 22.5% and the NE dropped 27.1%. The number of new houses for sale remained the same, but the months supply increased to 7.8%.
These are really big drops and they indicate the correction may be accelerating.
New Home Sales Drop 3.8%
>Housing activity has yet to find the floor, the latest existing-home sales data showed Wednesday.
June sales fell 3.8% to an annual rate of 5.75 million, the lowest since November 2002, the National Association of Realtors said. It is the fourth straight monthly drop and below estimates.
The supply of unsold homes at the current sales pace held at 8.8 months, near the highest level since the early 1990s.
Median prices rose 0.3% vs. a year ago, the first such gain in 11 months.
And housing problems continue to hurt the homebuilders:
From the Street.com
Pulte reported a second-quarter loss of $507.5 million, or $2.01 a share, compared with profit of $243 million, or 94 cents a share, a year earlier. The loss was in line with the company's projection last week of $2 to $2.10 per share.
...
Elsewhere, Ryland posted a loss of $52.4 million, or $1.25 a share, compared with profit of $94.8 million, or $2.03 a share, a year earlier.
From CNBC
D.R. Horton Inc. said Wednesday it posted a deep loss in the fiscal third quarter as the homebuilder recorded one of the largest charges to date to write down the value of unsold inventory.
The Fort Worth, Texas, company posted a loss of $823.8 million, or $2.62 per share, in the period ended June 30, compared with year-earlier net income of $292.8 million, or 93 cents per share.
The most recent quarter included pretax charges of $835.8 million for inventory impairment and $16.2 million to forfeit deposits on land. Horton said the quarter also included a goodwill impairment charge of $425.6 million.
And the consensus is for a prolonged problem in the housing market.
The latest trends offer some hope for an eventual recovery in a U.S. housing market that generally has been cooling since mid-2005. Even so, many economists and industry executives say that recovery will be very gradual and won't start before 2008 at the earliest. That's partly because more-stringent lending policies are keeping many potential buyers on the sidelines, while others are holding off in hopes of prices heading even lower. Meanwhile, there is still a glut of homes on the market in much of the country, especially in Florida and parts of Arizona, Nevada and California.
There are several problems with the housing market that explain why it is going to take a long time to correct or even reach bottom.
1.) There is a tremendous amount of inventory available for sale. Excess inventory = lower prices.
2.) Tightening credit standards = decreased demand = lower prices.
3.) There are a ton of ARMs and other exotic mortgages out there that are going to adjust over the next 12-18 months. The problem with the adjustment is they will occur when the value of homes is decreasing. This will make refinancing that much harder.
The short version to all of this is simple:
The housing market is nowhere near a bottom.