Skip navigation
MOST POPULAR RELATED TAGS
  • TOPICS
  • SECTORS
  • COMPANIES
 

  Current Housing Indicators
CURRENTPREVIOUS
Existing Home Sales4.91m5.02m
New Home Sales460,000520,000
Housing Starts817,000872,000
Building Permits786,000857,000
HMI1417
Existing Home Prices$203,100▼ (annually)$224,400
New Home Prices$221,900▼ (annually)$236,500
 
Realty Check Video Gallery
The $800 billion move from Treasury is having a big impact on mortgage rates. Greg McBride, of Bankrate.com, and CNBC's ...
There were more troubling statistics out today in the housing sector, and CNBC's Diana Olick has the details.
 
HOMEBUILDERS TOP 10 INDEX
Loading...
Loading...
Loading...
Loading...
Loading...
Loading...
Loading...
Loading...
Loading...
Loading...
See all Realty Check PostsRealty Check with Diana Olick
Text Size
Sep.25
12:13 PM ET
Thursday, 25 Sep 2008
Hey--Take Some Of That Bailout And Buy New Home Inventory

Fixing Whats Broken
CNBC.com

Given everything that’s going on in Washington, it’s not surprising that the new home sales number out today would be ugly. Sales in August were down 11% from the month before. But wait, that’s August.

Yes, that was sales activity (contracts signed actually) in August, before the Fannie-Freddie takeover, before Lehman's demise, before AIG's [AIG  Loading...      ()   ] takeover and before even a whisper of a $700 billion bailout.

It’s also important to note the difference between the existing home sales number we got yesterday and the new home sales number we got today. The National Association of Realtors, which measures existing home sales, bases its number on closings, not contracts signed, so these are homes that actually changed hands.

The US Commerce Department, which tallies new home sales, bases its figure on contracts signed. Given the enormous percentage of cancellations in new home sales (recently around the 30-40% range for the big public builders) many of these sales will never actually come to fruition. In other words, that nasty sales level is even nastier than it looks.

Last month many of the analysts in the new-home-builder-know were starting to use the word “bottom,” maybe not for housing starts, but for sales. Prices were down and the market was already buying into the builder stocks (the market tends to anticipate the bottom a few months previous). But when I see inventories rise, and that’s months supply, not actual number of homes, which the builders managed to cut by 4 percent, I have to call that bottom into question again.

Now the big builders will say they are looking forward to that $7,500 tax break for new home buyers that came out of this summer’s housing rescue bill, but given what’s going on in the credit markets right now, I wonder how much that’s going to matter.

  • Should Buffett Negotiate Deal?
  • Who's Afraid of Salary Cap?
  • No Bailout=Market Carnage
  • How Exactly Will Bailout Work?
  • S&L Rescue Now Looks Easy
  • Here’s a suggestion: Instead of dumping 700 billion dollars onto Wall Street and watching the bottom feeders shovel it up, why not do some of that, but take one hundred billion of my precious tax dollars and buy up the inventory of new homes (at the median price of $221,900 you could buy 450,653, which is almost exactly the current inventory of new homes for sale). Take those homes and give them, with manageable low-rate FHA loans, to all the folks who lost their homes to foreclosure.

    It could make a nice return for the government in the long run and would put jobs back into one of America’s manufacturing sectors, not to mention pump a bit of stock price back into the public builders. It might also stabilize home prices, which in turn would allow folks to keep paying their mortgages, which, oh my goodness, might put a little value back into all those mortgage-backed securities that are bringing down Wall Street to begin with.

    Just a thought.

    Questions?  Comments? 

    © 2008 CNBC, Inc. All Rights Reserved

    Permalink: /id/26887759

    HOME  |  NEWS  |  MARKETS  |  EARNINGS  |  INVESTING  |  VIDEO  |  CNBC TV  |  CNBC PLUS  |  CNBC MOBILE  |  CNBC HD+
    About CNBC   |   Site Map   |   Privacy Policy   |   Terms of Service   |   Advertise   |   Help   |   Feedback   |   Video Reprints
      Data is a real-time snapshot   *Data is delayed at least 15 minutes

    Global Business and Financial News, Stock Quotes, and Market Data and Analysis