By John Galt
April 25, 2011
The statement from the Bureau of the Census via the Department of Commerce is pretty stark:
Sales of new single-family houses in March 2011 were at a seasonally adjusted annual rate of 300,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 11.1 percent (±21.7%)* above the revised February rate of 270,000, but is 21.9 percent (±10.3%) below the March 2010 estimate of 384,000.
The news is already being spun as a net positive by the mainstream and infomercial financial media as an indication of a strengthening economy.
The decline year over year is further highlighted by the increase duration of new homes median time for sale now back up to 8.5 months. The improvement though has a very dark underside which is best demonstrated via the usual package of graphs.
First the non-seasonally adjusted new home sales by month, with March coming in at 29,000 homes; 8,000 more than the number adjusted up from 19K to 21K:
While the bounce is nice, we are still well below historic levels unseen since the 1970′s, thus presenting a bigger dilemma for the Federal government. What happens if the Feds stop promoting mythical demand for housing by dissolving the GSEs? That is best reflected in the chart of home purchases of $299,000 and less:
The increase in new home purchases for $299K homes or less has a lot to do with the HUD liquidation program (Government housing developments with $100K or less new homes being seized from delinquent developers) and the willingness of the GSEs to purchase selected mortgages which may or may not be viable over the long term. Add in the complexities of developers and contractors trying to get funding from the banksters for new projects that are unwilling to gamble on housing, and these numbers should continue to bounce along the bottom for months if not years to come.
The new homes sales for the over $300,000 price range is even more fascinating:
The majority of the new homes purchased in this price range once again was within the GSE conforming limits and once again the homes for $750K plus were minimal at best, indicating the “wealthy” are not purchasing new homes in great volume; at least inside the United States.
With a 300,000 SAAR for new home purchases, it is doubtful the construction industry has any incentive to hire beyond the seasonal variations and the industry shall continue to remain depressed at historically low levels. Despite the depressing information presented above, this is a net positive for the economy as the last thing needed in the housing industry is more supply. The one thing that is needed is the extraction of the Federal government’s meddling and involvement at every level as soon as possible but with a Marxist ideologue at the top, I do not look for that to happen any time soon.