Housing Still Soft

The news keeps trickling out. This week is very busy from a reporting standpoint with today’s focus on sales of new homes. The results are not that good and suggest the real estate market is still weak. This, of course, is no surprise – except to the perennial optimists ate the National Association of Realtors.

Sales fell to a seasonally adjusted annual rate of 342,000 which was off 7.6% from November’s 370,000. Remember that November’s figure was down 9.3$ from October. So in two months we have given back much, if not all, the gain seen in the late summer and early fall. For the year as a whole sales of new homes were an abysmal 374,000, which is 23% down from 2008 and easily the worst since this particular statistic was first recorded. It takes little imagination to see that we are likely to record another very poor year in 2010: we are beginning the year with a ‘run rate’ a full 30,000 units below last year’s record low. It will take quite an effort to crawl back just to 2009’s awful performance let alone get back into a more comfortable range.

That’s what happens when you binge: the aftermath is sometimes very unpleasant. This one’s a doozy.

Taking today’s data along with the earlier reports about sales of existing homes, I can find reason to forecast anything very positive for housing. Clearly this is a great time to be a buyer: prices will be soft as sellers dump inventory and the backlog of unsold homes gets cleared. This adjustment is still underway and there is no end of it in sight. The data simply does not support a firming in prices or sales for a while yet.

The glut continues.