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Friday, March 28, 2008

February 2008 Housing Statistics

The Quick Summary
Buyers need not hurry. Builders are actively working to lower inventory and prices. Individual sellers of existing homes might be seeing the light in terms of lower prices. It is elementary that prices must fall before normalcy returns. The question is by how much.

Supply: Still Grappling With Mega Inventories
Building Permits, Starts and Completions, (PDF): Permits starts and completions, the key elements that foretell new home supply, were down 36.5%, 28.4%, and 25.8% respectively when compared with Feb, 2007. This has been the pattern for many months now.

The market needs less inventory, so The Big Picture called this "perversely good news", under the headline, "Great News! Housing Starts and Permits Plummet". Paper Economy gives its usual regional breakdown, showing that in the South, things were slightly worse on all three measures.

New Home Inventories, (PDF): Despite the big cutbacks by builders, there was no effect on the supply of new homes, which came in at a 9.8 months' supply. This is tied for the highest level in the last 12 months, and is the highest level since 1981. Many months of cutbacks from 20% to 40%, without declines in inventory is a testament to the current state of demand.

Existing Home Inventories, (PDF): Came in at a 9.6 months' supply. During 2005 supply stood at a mere 4.5 months for this sector. It's a long road back.

Measures of Demand
New Home Sales, (PDF): 29.8% less than last year, or an annual rate of 590,000 units, Money CNN informs us this is the lowest rate in 13 years. In 2006, the nation saw 1,051,000 units sold, a decline of 43.8%. The median price is 2.9% less than last year.

The Big Picture succinctly outlines how this new home sales report stacks up historically, while The Wall Street Journal outlines some of the pricing tactics builders are using to lure buyers and trim those record inventories.

Paper Economy, in its regional breakdown, shows us that no part of the nation was spared, though the South fared better this time around by a couple of percentage points.

Existing Home Sales, (PDF): Sales were 23.8% less than last February, and 29% less than 2005, while prices fell 8.2%. The Wall Street Journal indicates this is the largest decline on record. Let's see what others have to say for perspective.

The Big Picture provides context, while Paper Economy shows us that the South was a bit better off than the rest of the nation in February.

Forecast
Prices have to fall more, and buyers have time. Robert J Samuelson had a widely cited piece in The Washington Post indicating, calmly, that the current situation calls for levels as they were in around 2004. Merril-Lynch chimes in as well. Paul Krugman of The New York Times, also sees double digit price decreases as a requisite ingredient.

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