Wednesday, July 18, 2007

Housing Index for New Home Sales Drops to Lowest Level Since 1991

The new home sales index dropped for the 5th straight month and is now at its lowest level since 1991, from Yahoo. Market Watch also has a good analysis of the index.

Personally, it is about time that people begin catching on to the conditions in the housing market. Let's face facts, there is a significant adjustment taking place in the housing market now. Inventories are up, sales are down, loan criteria are tougher, the consumer is waiting on the sidelines for prices to decline more, and rates are higher. The housing/builder market has to adjust to the new realities or they will continue to get the more of what they already have - limited sales. I realize this is easier said then done, but business is about making a profit and if you can't ride through the trough you don't get to make a profit when the market turns up. So it is all about making it through the trough. One of the ways you do this is by admitting where you are really at.

A key measure of industry sentiment on the U.S. market for new homes fell to its lowest point in more than 16 years, a trade group said Tuesday, as builders struggled with rising inventories of unsold houses across the country.

The National Association of Home Builders/Wells Fargo housing market index, which tracks builders' perceptions of current market conditions and expectations for home sales over the next six months, fell to 24 this month, the lowest reading since January 1991, the NAHB said.

The index is based on a survey of residential developers nationwide. It was the fifth straight monthly decline.

Index ratings higher than 50 indicate positive sentiment about the market. The seasonally adjusted index has been below 50 since May 2006.

"The single-family housing market is still in a correction process following the historic and unsustainable highs of the 2003-2005 period," David Seiders, the group's chief economist, said in an e-mailed statement.

Seiders said he expects sales to rebound by year-end (my emphasis) and new home construction to start recovering by early next year.

Oh really! How is this going to happen? The last large housing slump started in the early 1990s and lasted better than 8 years.

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