Buried in the Commerce Department report on New Home Sales in December isthe full year tally for 2007, and it ain’t pretty. Home builders sold 774,000 homes during the year, down 26.4 percent from 2006.
Just imagine selling over a million homes one year and barely 75 percent of that the next! In December, the “annualized rate” was 604,000, so that means that sales slowed more and more toward the end of the year.
What strikes me about the yearly figures are prices. In December, the price of a new home was down 10.4 percent from December of 2006, but if you look at the year-end full number, new home prices were actually up in all of 2007 0.2 percent from 2006. Again, it goes to show that things deteriorated toward the end of the year, and they continue to deteriorate.
I’m trying to find a bright spot in the report, but it’s hard. Inventories are troubling as well. They should be going down, given price drops and builder incentives, but they actually went up in December to a 9.6-month supply. At the current sales pace it would take almost 10 months to sell all the homes on the market.
As the wires scream all sorts of headlines about this being the worst report since the severe housing recession in 1980, I have to wonder what’s going to turn it around and when? I continue to believe this is not entirely about mortgage rates and availability, or even affordability--it’s all about consumer confidence. Until the numbers stop falling, nobody’s going to want to get back in the game, but the numbers won’t stop falling until people DO get back in the game.
Historically there has been some significant move, like mortgage rates or a boom in the economy, to spark housing, but mortgage rates are there, and I don’t know that we’re going to see a boom in the economy, quite the opposite.
But I do take solace in the fact that at some point home prices will hit a point that they’re just too good to pass up. Unfortunately, that hurts other aspects of the economy and doesn’t help one bit in the growing number of foreclosures due to negative home equity. I know you all keep yelling at me to find the bright spot. Maybe you can help?