- ERTS So Good
- Cramer: Retail Investors Returning to Market?
- Nov. 16: Unusual Volume Leaders
- Getting To The Heart Of The Merck-Abbott Embargo Break
- What MGM's Sale Could Say About Value of Content
- S&P Stocks Trading at New 52-Week Highs
- Halftime Report: Will Bernanke's Dollar Talk Sideline Rally?
- Warren Buffett's Berkshire Portfolio Snapshot Coming Later Today
- Mixed Signals Come From Retail Sector as Holidays Draw Near
- Will the S&P 500 Close Above 1100?
MOST SHARED
- Fed Likely to Keep Rates Low Despite Dollar's Fall: Bernanke
- Has Twitter's Finest Hours (Seconds) Come and Gone?
- Millions May Have to Repay Part of Obama Tax Credit
- U.S. May Wind Up Green With Envy
- Underwater Mortgages Could Sink Even Deeper
- Bernanke Offers Something For Everyone
- BlackRock: Central Banks To Be Net Buyers of Gold
- U.S. Cities With The Most Underwater Mortgages
- Madoff Auction: $4,750 for a Decoy Duck?
- What's Kept the Rally Going? Investor Fear, Not Confidence
RSS FEED
Text Size 
New Home Sales rose by 2.4% last month while June numbers were revised downward. While there are many factors to consider, the results continue to be a real life lesson of basic economics and the rules of supply and demand. Looking at the long term trends, don't expect changes overnight.
Any introductory econ class will teach that as long as there is money to be made, suppliers (in our case, builders) will continue to join the market and add supply. As supply increases above the natural demand, inventory will build and margins will shrink. Suppliers, ultimately, will need to cut price so they can sell off their inventory and bring supply levels back to an equilibrium with demand. The charts below show how demand and new home sales increased from 2001 through 2005. Supply, however, kept climbing which ultimately helped lead us to the situation we are in today.
New Home Sales (10-yr chart) are way down... |
 |
 |
Of course there are other factors that have had an impact including the credit crunch, lending practices, the economy, etc. But the basic economic principles still hold. As a result, home builders like Pulte Homes [PHM
Loading...
()
], KB Home [KBH
Loading...
()
], Lennar[LEN
Loading...
()
], and Hovnanian [HOV
Loading...
()
] have been hit hard. The rules apply on a regional level too and some markets are beginning to show signs of a bottom as prices have reached a level that buyers are coming back and working down the inventory.
Comments? Send them to
- Where, what, how.
- CNBC's Jim Goldman asks: Has the sun begun to set on Twitter? Data suggests its best days are over.
- Nearly 1,000 bidders showed up to the auction of Bernie Madoff's possessions, raising nearly $1 million for his victims.
- De Loach Vineyards is selling its pinot noir the old fashioned way, helping to cut energy and transportation costs.
- Why are the Chinese concerned about the progress of U.S. health care legislation?
- CNBC's Maria Bartiromo talks to rapper Snoop Dogg about brand identity in both business and music.
Data is a real-time snapshot *Data is delayed at least 15 minutes