New Home Sales: 7 Year Low

There was no good news whatsoever in today’s New Home Sales Data:

• Sales of new-homes dropped nearly 4% in February.

• This is the lowest reading since June
2000, according to Commerce Department data.

• On a year-over-year basis, sales were down 18.3%.

• Inventories of unsold homes rose 1.5% to 546,000. This represents an
8.1-month supply. Marketwatch notes this is the largest inventory in relation to sales since
January 1991.

• On a year-over-year basis, the inventory is up 26.6%. 

•  The
median price rose
2.8% sequentially — down 0.3%  year-over-year basis, to $250,000.

This report is hard to reconcile with last week’s Existing Home Sales; One of them is likely wrong, and I suspect the NAR prepared Existing Home Sales is the dud . . .

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  1. Michael Schumacher commented on Mar 26

    >>I suspect the NAR one is a dud<< BR- Take into account how and where the numbers from the NAR report are taken from. I t also does not account for any cancellation activities. NAR=Head cheerleader for Realtors. How anything from them has ANY credibility left at this point is a mystery to me....are'nt we on the 8th or 9th month of a bottm according to them? LOL.... MS

  2. costa commented on Mar 26


    “Sales of newly constructed U.S. housing unexpectedly slowed again ”

    Its funny how the make it out like its a big shock that housing is tanking. We have known this for quite some time now its no shock

  3. Michael Schumacher commented on Mar 26


    there’s an institution of integrity is ever there was one, ranks right up there with CNBC.

    BTW any of you catch JDO on Friday??.made my year so far…..


  4. GerryL commented on Mar 26

    Housing starts were up last week. Housing sales are down. Doesnt that mean the builders are still over building?

  5. wally commented on Mar 26

    Well, whadayaknow… some of the blogs that predicted the hard numbers would triumph over head-in-the-sand optimism may have been correct.

  6. Mike_in_FL commented on Mar 26

    I put a few charts up at my blog. One shows the sales rate going back 17 years or so. Another shows the number of new homes for sale on the market going back as far as the data goes (1963).

    The supply chart is simply astonishing — we have about 130,000 more new homes on the market now than at any time in U.S. recorded history. Existing home supply is about 1 million units above any reading we’ve seen in the past 15+ years. The bottom line is we built way too many new homes to meet “false” demand — demand from speculators. Now those speculators aren’t just not buying, they’re trying to sell. So it’s no surprise the supply/demand picture stinks.

  7. jmf commented on Mar 26

    and remember the mess in the subprime sector has started at the end of february..

    so the first real impact will be seen in march.

  8. super-anon commented on Mar 26

    This report is hard to reconcile with last week’s Existing Home Sales; One of them is likely wrong, and I suspect the NAR prepared Existing Hom Sales is the dud…

    No… the existing home sales report just trails the new home sales report substantially. Maybe by about 1.5 months or so.

    Notice that new home sales went up for three months straight then “fell of a cliff”.

    Now existing home sales are up three months in a row. What happens next?

  9. Jay Weinstein commented on Mar 26

    And what does the Oracle of Housing Mr. David Lereah have to say today? LOL

  10. costa commented on Mar 26

    “And what does the Oracle of Housing Mr. David Lereah have to say today? LOL”

    Let him huff some glue first before he comes out with his statement

  11. Vdsat commented on Mar 26

    It’s not that one of the housing reports is wrong, it’s that existing home sales lags new home sales.


    Existing home sales data are provided by the National Association of Realtors®. According to them, “the majority of transactions are reported when the sales contract is closed.” Most transactions usually involve a mortgage which takes 30-60 days to close. Therefore an existing home sale (closing) most likely involves a sales contract that was signed a month or two prior.

    Given the difference in definition, new home sales usually lead existing home sales regarding changes in the residential sales market by a month or two. For example, an existing home sale in January, was probably signed 30 to 45 days earlier which would have been in November or December. This is based on the usual time it takes to obtain and close a mortgage.

  12. Ross commented on Mar 26

    “We need you for a marketing campaign for the glut of condominiums in Florida!”

    Rocky Lereah “Can’t. I never use em”

  13. jmf commented on Mar 26

    hi mike,

    the chart is really outstanding!


  14. lewis commented on Mar 26

    The curious part to me is the .3% yty drop in the price of new homes…I’d have thought if I had a business with massive excess inventory, I’d cut prices to move it…apparently not so in new homes (accounting practices leading them down the road of delusion?). Meanwhile, their competitor – existing home sales – dropped prices 3% yty and the bottom doesn’t appear to have dropped out for them. Guess home shoppers are going where the value is, the existing homeowner who dropped his price 3% (no big deal since he is probably sitting on a massive paper gain) instead of the new home builder who is holding out for pretty much last years price (WHY? ITS ECONOMICS SO SIMPLE A GEICO CAVEMAN COULD DO IT)


  15. Marc commented on Mar 26

    “It’s not that one of the housing reports is wrong, it’s that existing home sales lags new home sales.”

    Yes, and this fits in with the idea that the mild December winter back east probably helped home sales. Whereas the west coast weather was about average and there wasn’t the same increase. It’s all coming together. yikes.

  16. Michael Schumacher commented on Mar 26

    I can’t help be think that the market is being set up to be rescued by whatever the fed has to say on tuesday, weds. AND Friday. Friday’s “speech” could’nt have better timing for it is the end of the qtr. and Mr “inflation” speaks at midday about what…….you guessed it inflation, oh sorry PCE deflator.,2411,EID+9669+3+15+2007+H+AR+FR+EU+,00.html

    Anyone recall the fed bewing so prolific at the end of ANY qtr.? I can’t I’ve been at this for a long time….pre 1990.


  17. Eclectic commented on Mar 26

    Tuco: “Bondie… Bondie!… BONDIE!!, you know what you are, Bondie?… You’reeeeee aaa loooowwwww doowwwwwnnnnn dirty raatttteeeee is whaaaatt you aarrreeeeeee, Bondie!!!”

    Bondie (lights a cigarette, rides off): “There’s two kinds of people in this world, Tuco… those that believe rates are going up and those that dig… and you my friend, you dig.”

  18. jkw commented on Mar 26

    New homes have been coming with more freebies over the past year. The builders don’t like dropping the nominal price, but they are willing to throw in $50k-$100k worth of free upgrades. So if the nominal price has dropped at all, it means the actual price has dropped a lot (even before you account for inflation). I’m not sure how many more freebies the builders can throw in though. They might have to actually cut prices soon.

  19. VJ commented on Mar 26

    this is the largest inventory in relation to sales since January 1991

    When the national economy was in…… RECESSION.

  20. Eclectic commented on Mar 26

    I will say this.

    These comments are not directed to any builder, buyer, association, trade group or any individual. They are generalized comments about the reporting of real estate transaction prices (and other prices).

    It seems to me that if a builder sells a house to a buyer, and if in order to make the sale the builder has to offer incentives such as pre-paying taxes or insurance for the buyer, or by offering anything of monetary value larger than a simple thankyou basket of inconsequential goodies… then, if that price posted and reported to various governmental authorities and/or associations doesn’t reflect the costs of those incentives as a reduction of the true sales price, then that reported price is a fraudulent misrepresentation, and it would deserve all the same scrutiny that is being given liar loans.

    Misrepresenting price levels of any good or service — when the information about those prices, in the aggregrate, is so important to deserving people making informed and reasonable decisions — is the height of fraud in my personal opinion.

    If you sell a house for $250,000 and you have to give away incentives valued at $25,000 to do it, then you have sold the house for $225,000. Posting the sale at $250,000 is a misrepresentation.

    It is true that for years auto manufacturers have competed as oligopolistic competitors, a form of economic competition in which prices are held steady and competitors compete on non-price attributes (freeing them to offer monetary incentives), however the effective competitive strategy of these companies is still no justification for misrepresenting the prices of automobiles reporting to either governmental authorities or trade group associations.

    Misrepresentation is misrepresentation, regardless of how it is delivered.

    I say make the vendors report the prices according to the true exchange prices paid. The negotiations are between them and their buyers (and I would not object to their manner of competition), but the prices they negotiate are misrepresentations if they’re meerly pencil-whipped to conform to the price the vendor wants to defend.

    Overstating the trade-in price of a vehicle being traded in is certainly something very difficult to evaluate as being a fraudulent overstatement of the new vehicle price, but the monetary present value of loan incentives or rebates used to induce the sales are clearly and easily itemized.

    The only people who could object to this policy I’ve suggested are the mindless proponents of supply-side economics, who, as I have said here before, are largely responsible for this hocus-pocus pro-forma EBITDA fantasy world we live in today… in housing and otherwise.

  21. Harley Evans commented on Mar 26

    From my note to clients on Friday Night 3/23/2007
    Today’s existing home sales figures were interpreted as bullish for the economy and I even read that some were pointing to this number as proof that the subprime loan problem has been “contained”. While I will not predict as to the validity of the forecast contained in these articles, I will say that if they look at the details of the nature of the data collected in today’s number, they / we will find a statement by the people collecting the data ( National Association of Realtors – no bias here, right?) that the monthly figures on home resales are compiled from contract closings and may reflect sales agreed upon weeks or months earlier. I would take that to mean, today’s number has not seen any impact from the subprime loan fallout yet and due to the lag effect will need a few more months to see what that impact will be.

  22. brion commented on Mar 26

    the “real” median price decline are probably even lower than that. I think the supersizing McMansion crowd have been skewing things higher. (Bush’s base of 1%-ers have been doing VERY well these last 4 years in particular)

    Agree though, that the speculative ferver will probably works its’ magic in reverse for some time.

  23. RW commented on Mar 26

    We may gain more insight into what the Fed sees as its #1 priority in the next few months: (a) Cut and it’s the economy and/or the markets or (b) hold (or raise) and inflation and/or currency stability is #1. I’m inclined to believe it will be ‘b’ myself but choosing between a rock and hard place can’t be easy for anyone.

    The 64M question remains, how tough is the unwinding of this incredible, global credit expansion going to be?

  24. Alejandro commented on Mar 26

    Hello there from Argentina – I’ll try to give a view from someone who is a bit removed.

    The NAR report is not necessarily a dud – remember that new sales in December also “surprised” on the upside. Used home sales announced Friday are really telling us what it was like in Dec / early Jan.
    My take is that there were a lot of sales at the end of the year to invest money from sales earlier in the year before the tax relief was lost.

  25. me commented on Mar 26

    Don’t you love that adjective “unexpected”?

    Let’s see, we have rising inventory and we have borrower funds for marginal buyers drying up so it sounds like Roubini is going to be right.

  26. MoreBubbly commented on Mar 26

    In that youtube video about the housing bust, it showed that residential housing construction went down substantially in 1929 before the depression started.

    That pre-recession housing slump didn’t end well.

  27. Richard commented on Mar 26

    Real estate is highly localized. While I see weakness in certain towns near me others are holding up near peak levels fairly well. In the end all that people really care about is their situation and their neighborhood. Now as to the question of macro to micro connection/spill down, there’s an interesting topic.

  28. Michael Schumacher commented on Mar 26


    very well put, especially the disconnect between sale price reported and actual. I’ve pointed that out at other sites and I sort of get a “huh…just look at the numbers they speak for themsleves”….It pains me to think that there are several Billions of dollars in economic decisions that are based on those news, sorry PR releases, that qualify as having any true meaning.

    Take a look at WCI trade today, right after the PR came out it tanked hard to 22, got below and then was miraculously rescued by some fairly heavy buying………although that has alot of “other things” going on with it now like Icahn’s supposed bid at 22. My take, at least on that one….let him have it at that price (and it would cost me alot on my puts) however it could’nt happen to a “nicer” guy.


  29. Peter commented on Mar 26

    Feb New Home Sales, a measure of contract signings of newly built homes, totaled a much weaker than expected 848k vs the consensus of 985k and down from a revised 882k in Jan (revised from 937k). It’s the lowest reading since Aug ’00. Due to the weaker sales #, the inventory to sales ratio rose to 8.1 months up from 7.3, to the highest level since 1991. The median home price doesn’t square with anything we’ve seen as prices rose 2.8% sequentially to $250k, the highest level since Oct. The price though doesn’t reflect incentives that builders include to move homes. Cancellation rates of contracts signed have still been running at about 30%.

  30. fred c. dobbs commented on Mar 26

    One thing that must be made clear upfront on these numbers: THEY ARE ONLY GUESSES!!! The government says sales fell 3.9% plus or minus 17.4%. Sales in the Northeast were down 27% plus or minus 65%! No one should make any firm conclusions based on these figures. You have to go out six months to get past the statistical noise. The trend is down and it has nothing to do with weather or mortgage rates.
    The other major misconception in the comments is that the median price means something. It doesn’t. It’s skewed by the mix of houses that sold. If the weather was favorable to sell more half-million dollar homes in California, but was too snowy to sell $180,000 homes in Buffalo, that will show up in the median sales price. Ignore these prices! Instead: Watch the Case-Shiller price indexes tomorrow.

  31. Michael Schumacher commented on Mar 26

    never ceases to amaze the market’s ability to shrug off what it had delvered to it via the home #’s….we WERE down over one hundred points and it appears we are rallying into the final hour……..may be even close positive.

    What is it going to take to allow gravity a chance?

    Another Fed/treasurey drop today. That makes a total of almost $80 billion in “loans” to the brokers-just in the last week and a half. Let’s put that in context, the recently highly debated provision to continue to fund the troops clocks in at $126billion ( and that’s with quite alot of pork in it to get certain democrats to vote for it) at the rate the fed is pouring money into the market we will surpass that amount by sometime THIS WEEK.

    Apples and Oranges?? posibly however the numbers are staggering when put into that context. Why does’nt Bush et al just go get a loan from Uncle Ben??..he’ll even give him a low interest rate….

    Pretty amazing and downright deceptive.

  32. Michael Schaefer commented on Mar 26

    Are the two reports actually saying different things? New housing starts were up compared to January, but -way- down compared to Feb of last year; this would seem like the key point, but I could be overlooking something.

  33. mhm commented on Mar 26

    …That makes a total of almost $80 billion in “loans” to the brokers-just in the last week and a half.

    Not quite. You should subtract the Repos that expired.

    We have now “only” $18.5B, $9B from the 14-day (March 22) and $9.5B from the 8-day today (March 26). Those two plus the 1-day loans that will follow will be probably enough to finish the week positive (end-of-quarter rosy window).

  34. Harley Evans commented on Mar 26

    The market rallies at the close – marking up portfolios for the end of quarter window dressing is more important to the big fund managers than one little housing figure, that may or may not be all that accurate. Watch what happens on Thursday and Friday for a more “real” feel for the direction of the market. Also Bernanke will have put his spin on it during Wednesday’s testimony…

  35. Ralph commented on Mar 26

    Prices went up? This just does not reconcile with the quarterly reports from the home builders. How is it possible for profits to plunge if prices are going up.

    This kind of bad data makes my blood boil! I want to scream from the rooftops.

    Then I go and short some more home building stocks and watch the money flow in. That makes me feel all better.

    Two additional tidbits.
    One must not forget inflation when comparing home prices YOY. This is due to the 30 year loans that most people take.

    Everyone is also overlooking the fact that last months number was revised downward. So, when looking at the trend the news is even worse.

  36. Eclectic commented on Mar 26


    Thanks for the nod on my words regarding asset price reporting.

    Please pardon me if I do not respond to specific stock trades, their prices or their evaluations. It’s not what I do on The Big Pic.

    Best to you.

    Ciao, Eclectic

  37. Winston Munn commented on Mar 26

    If you think the home numbers were bad, wait about 4-5 more months until the lagging indicator of unemployment catches up. The curiosity to me about this month’s housing numbers is how much of the drop is due to tighter lending standards?

    It is when you view the cumulative data over the past 3 months that points so decidely to a hard landing if not outright recession that you begin to understand the admonission that “markets can stay unreasonable longer than you can stay solvent.”

    I want to have a lot of cash on hand when reasonableness sets in.

  38. Michael Schumacher commented on Mar 26


    I did’nt subtract them as they were still part of the equation as it reflects a sum that was put into the hands, or sorry “auctioned”- as the Treasurey site puts it to the brokers. Sure they pay them back but you can’t discount what they’ve paid back from what was taken. It still happened. Your logic is a bit like the disconnect on assest price reporting.

    If I take or am handed $100 and then pay it back it does’nt change the fact that I took or had $100 that I had to pay back

    No problem..I fully understand….


  39. Teddy commented on Mar 26

    MHM, but did the repos play ping pong with M-3 before going back to rest? And shouldn’t Bernanke lecture and testify before Congress only under oath and after he has sworn on the holy Bible? …….Just for the record?

  40. arch stanton commented on Mar 26

    Eclectic, did you know that, when Mr. Lereah is paid, he always sees the job through??

  41. wunsacon commented on Mar 26

    ‘little help, anyone?

    A few days ago, I followed someone’s post and saw a chart of the “open market purchases”, repo action, or broker loans or something. Not much commentary accompanied the graphic. And, although Barry commented on this stuff a few weeks ago, too, it was one of the posts I really didn’t understand.

    Do any of you have a link to a good explanation of what these concepts are and what they mean? Is the Fed or Treasury propping up the market?

  42. mhm commented on Mar 26


    I see it as outstanding balance. If I renew the $100 loan for another day I still have only $100 to work the market. Not $200, it’ll not add to the balance.

    Sorry for the late reply.

  43. Eclectic commented on Mar 27


    I’ll have to ask Bill Carson about that. BTW, Arch, you need to eat better… put some meat on those bones.

    Another favorite scene: Tuco’s hands are tied and he’s still kicking and cursing Blondie, who has hauled him in for a bounty reward at the town jail and goes in to get the Sheriff:

    Tuco: “Well, look at that… one bastard goes in and another one comes out again!”

    And you know what Tuco and Blondie did after that, don’t you, Arch?

    They continuously played “Flip this Tuco.”

    However, Tuco evidenced a tad of risk aversion and questioned the economics of the enterprise, so Blondie got pissed off because he was making good money with Tuco’s neck assets being the primary risk. After all it wasn’t Blondie’s neck.

    So Blondie sent Tuco on the little desert hiking adventure and instead played the same flipping game with Shorty, until Tuco caught up with them and Shorty got the short end of an adjustable bounty re-financing. Tuco I imagine would always in the end catch up to double-crossing flippers.

    New subject (or a new look at our old friend, Tuco):

    You know it’s funny that Eli Wallach could’ve been so memorable a character as Tuco. Wallach has said that he much preferred stage acting, and Broadway in particular, to movies (unless I’m misquoting him), but you could never have had a better Calvera (and his 40 bandits) in “Magnificent Seven,” or a better Tuco in “G-B-U.” My guess would be that Sergio Leone probably saw Tuco in Calvera from the get-go.

    Finally, Barringo… my take on the trading for Monday, March 26th:

    –By end of day, confidence returned that Dr. Benber N. Anke will deliver, as all good monetarist daddies ultimately do–

    Speaking of Daddies… and little Bondie, my sweet little Bondie:

    Whoyo baby daddy is?
    …Whoyo, Whoyo?
    Whoyo baby daddy is?
    …Whoyo, Whoyo?

  44. MarkM commented on Mar 27


    If you are going to lift my G-B-U riff, at least give attribution man!

  45. Teddy commented on Mar 27

    On March 2, Bernanke spoke at Stanford and stated that the effects of globalization have provided cheaper labor, but that this was offset by higher energy and commodities prices. This speech was, of course, well before the horrific reports on PPI and CPI, BUT HE ALSO STATED THE US GOVERNMENT DATA OVERSTATES PRICE INFLATION.

  46. Eclectic commented on Mar 27

    Sorry MarkM,

    I blew the bridge and forgot it was your dynamite.

  47. Michael Schumacher commented on Mar 27


    With your last response you are now talking about something different. I am speaking to the total amount they have taken, it was put that way in the original post. I don’t see your logic in renewing a debt(that is different than being given more) that cancels out the original amount taken. Do you work for the HB’s?? LOL!


  48. mhm commented on Mar 27


    if I understand correctly your accounting standards 4x 1-day Repo of $9B amounts to $36B injected over the time period. You didn’t cancel the expired loans.

    If you substitute the 4x 1-day to 1 4-day Repo of $9B. They are equivalent, same dollar amount per day. But now your accounting will show only $9B over the time period.

    One can choose the accounting standards the fit the purpose. The argument that the Fed is propping up the market is correct but not to the extend some calculations make it to be.

    This is my last reply to the topic. Best regards.

  49. Michael Schumacher commented on Mar 27

    I guess you fail to see the irony of “explaining” it via the same way that the HB’s are reporting asset sales. That’s ok….it’s fairly simple to understand if you look at it for what it’s worth and not in a way that takes the original amount and then discounts that amount by the amount you’ve paid back. You still took that amount regardless what you’ve paid back. What was VERY simple has turned into an apples and oranges comparison based on your original reply.

    I guess you did’nt know that


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