Ray of Hope?

THE BE YOUR OWN ECONOMIST ® BLOG

Today the Census Bureau said (http://www.census.gov/const/newressales.pdf):

“Sales of new one-family houses in September 2008 were at a seasonally adjusted annual rate of 464,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 2.7 percent (±12.1%)* above the revised August rate of 452,000, but is 33.1 percent (±8.9%) below the September 2007 estimate of 694,000.

“The median sales price of new houses sold in September 2008 was $218,400; the average sales price was $275,500. The seasonally adjusted estimate of new houses for sale at the end of September was 394,000. This represents a supply of 10.4 months at the current sales rate.”

Bottom Line: Prices continued to fall and inventories remained near record highs.

This reinforced the impression created by the National Association of Realtors” October 24 report (http://www.realtor.org/press_room/news_releases/2008/ehs_rise_on_affordability?LID=RONav0021 ):

"Existing-home sales increased last month as buyers responded to improved housing affordability conditions, according to the National Association of Realtors®.

"Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 5.5 percent to a seasonally adjusted annual rate¹ of 5.18 million units in September from a level of 4.91 million in August, and are 1.4 percent higher than the 5.11 million-unit pace in September 2007.

"The national median existing-home price3 for all housing types was $191,600 in September, down 9.0 percent from a year ago when the median was $210,500. "

Bottom Line: Prices continued to fall and inventories remained near record highs.

Conclusion: The pace of sales for new and existing homes may be bottoming out, but price-discounting leads the way and inventories remain high. This is bad news for homeowners whose equity continues to melt away as prices decline. It’s hard to see how economic conditions can stabilize without home-price stability. As long as household wealth continues to decline, households will limit their spending.

© 2008 Michael B. Lehmann