Have we hit bottom?

U.S. New-Home Sales Climb 11%, Most in Eight Years

By Courtney Schlisserman

July 27 (Bloomberg) -- Purchases of new homes in the U.S. climbed 11 percent in June, the biggest gain in eight years, underscoring evidence that the deepest housing slump since the Great Depression is starting to stabilize.

Sales increased to a 384,000 annual pace, higher than any forecast of economists surveyed by Bloomberg News and the most since November, figures from the Commerce Department showed today in Washington. The number of houses on the market dropped to the lowest level in more than a decade.

Falling prices and a drop in mortgage rates have started to lure buyers even as the unemployment rate rises. Economists estimate that the worst U.S. recession in five decades is on the verge of ending as downturns in housing and manufacturing ease.

“We are making some progress in absorbing this huge inventory overhang” and that “is a fundamental step we need to take to begin to see home prices improve,” said Robert Dye, a senior economist at PNC Financial Services Group in Pittsburgh. At the same time, rising joblessness means “a rebound will be modest at best,” he added.

Builders’ stocks jumped, with the Standard and Poor’s Supercomposite Homebuilding Index gaining 2.3 percent. The broader S&P 500 Stock Index was up 0.1 percent at 980.35 at 10:10 a.m. in New York. Treasuries, which fell earlier in the day, remained lower, with benchmark 10-year note yields rising to 3.75 percent from 3.66 percent at last week’s close.

Economists’ Forecasts

Economists forecast new home sales would rise to a 352,000, according to the median of 62 projections in a Bloomberg News survey. Estimates ranged from 335,000 to 377,000. Commerce revised May’s reading up to a 346,000 rate from a previously reported 342,000.

The median price of a new home decreased 12 percent to $206,200 from $234,300 in June 2008. Last month’s value compares with $219,000 in May.

Sales of new homes were down 21 percent from June 2008. They reached a record-low 329,000 in January, down 76 from the July 2005 peak.

The jump in sales in June was led by a 43 percent surge in the Midwest. Purchases increased 29 percent in the Northeast and 23 percent in the West. They dropped 5.3 percent in the South, to the lowest level since January 1991.

Properties for Sale

Builders had 281,000 houses on the market last month, down 4.1 percent from May and the fewest since February 1998. The number of unsold properties fell a record 36 percent from June 2008. It would take 8.8 months to sell all homes at the current sales pace, the lowest level since October 2007.

Other reports underscore the stabilization in housing. The Wells Fargo/National Association of Homebuilders sentiment index has risen in five of the past six months and existing home sales have increased for three months in a row.

Even so, foreclosure filings reached a record in the first half of the year, providing competition for homebuilders and pushing down the value of all houses. Also, rising unemployment, which economists forecast will top 10 percent by early 2010, threatens to restrain any recovery in housing.

Standard Pacific Corp., the U.S. homebuilder that gets most of its revenue from California, is among companies seeing a stabilization. It’s net loss, the 11th consecutive drop, narrowed to $23.1 million in the second quarter from $249 million a year earlier, the Irvine, California-based company said last week. Revenue fell 29 percent.

‘A Lot Closer’

“While we still obviously have not achieved the level of profitability that we ultimately need, we are a lot closer than we were a couple of quarters ago and believe that we are in pretty good shape in the short run,” Chief Executive Officer Ken Campbell said in a July 22 statement.

Federal Reserve policy makers have committed to a $1.25 trillion program to purchase securities backed by home loans in an effort to put a floor under the housing market and lower borrowing costs. Those purchases, as well as direct government purchases of Treasuries, drove the rate on 30-year mortgages to a record-low 4.78 percent in April, according to figures from Freddie Mac. Rates have since hovered around 5 percent.

Fed Chairman Bernanke said July 21 that the economy is showing “tentative signs of stabilization” and the “decline in housing activity appears to have moderated.”

Another incentive is the $8,000 tax credit for first-time buyers that is part of the Obama administration’s economic stimulus plan. Purchases have to be completed before Dec. 1.

NVR Inc., the fourth-largest U.S. homebuilder, said last week that new orders increased 2 percent in the second quarter compared with a year earlier. The rate of cancellations fell to 14 percent from 19 percent in the second quarter of 2008 and 15 percent in the first three months of this year.

To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net

Last Updated: July 27, 2009 10:16 EDT

So get this. I've been trying to spend about $80K on a house over the last several weeks. We keep making offers CASH with ZERO contingencies with $25K down NON-REFUNDABLE....AND....at FULL asking price to the banks!

And even in one case, we offered $1K more than they were asking and were STILL getting beat out by other investors the very next day! And we're talking bum%#@Michigan!

So is the market turning around? Don't know, but I can tell you this, the banks are offering properties for a lot less than they should be. And since they stopped foreclosing the buyers are all running around in circles chasing their tales. So in short, the market just got a ton tougher!

We finally got one for $49K that sold just over a year ago for $130K and needs very little work. Closing this week and rushing to get it fixed up and back on the market.

Just crazy....

I'm highly skeptical of this supposed "end of the recession" that some media outlets are trumpeting. First, I don't believe the numbers that the government puts out. They have an agenda. As does the media.
Second, whatever buying is going on right now seems to be speculators doing some bottom fishing. I'm of the mindset that a healthy real estate market is fueled over the long haul by the retail buyer. And they seemingly aren't too confident as indicated by the latest Consumer Confidence Index. That, combined with rising unemployment, tells me this "end of the recession talk" is Washington-speak for "re-elect me" next year. Color my cynical.

Dude, I totally agree. I think it's simply because the banks got some breathing room and quit beating on the foreclosures. That right there will make the market weird. And trust me, as I already mentioned, that's what's going on. Just because sales are up, doens't mean the right people (owner occupants) are buying. It just means investors (once again) are coming in to save the bank's BIGASS mistakes.
Just my two cents....

Not to mention that despite the increased sales numbers, (which are still anemic, by the way), prices continue to slide.

Adam, I think you are correct in your assessment.

Yesterday, I had a conversation with both a contractor and a realtor and asked them about this supposedly 'improving' market and they both mentioned that it was that the banks are getting rid of their REO and bank owned properties. Now that that pool is slowly drying up, investors are going to look elsewhere.

The contractor said he's got two homes he's building now and can't get a personal loan now (overleveraged).

Also, I read earlier this year that there are going to be around 1.2 million homes hitting the foreclosure market in 2009 alone. When you factor that statistic in, it's easy to see that the media is full of it. I've also seen that unemployment nationwide is over 10% now with 500,000 jobs being lost every month. Personally, I don't think we've hit the bottom yet although may realtors think we have.

Lease Options and other creative real estate transactions are really starting to pick up here in the NW. That should be another sign that things could still get worse, isn't it? Borrowers can't get conventional financing, sellers are having a tough time with their asking prices.

Andrew

There are three kinds of lies: lies, damn lies, and statistics.

I believe the "end of the recession" reports are being thrown out there to improve consumer confidence in hopes of creating a self-fulfilling prophecy (think happy thoughts), but if you're unemployed or in danger of being unemployed, how confident are you going to be?

The economic statistics come from so many sources and are so general in nature that they can be interpreted to say whatever you want (Did you know 78% of statistics are completely made up? ). The truth is nobody knows what's going on or what's going to happen with the economy. Hell, most people don't know what's already happened. All we can do is look to our past, find patterns in our economic history, and form logical conclusions.

Here's a logical conclusion... Lenders have been instructed to delay or cease many foreclosures, which will only put off the inevitable and create a logjam of non-performing loans that are just sitting there until the banks are allowed to take action and then the tidal wave of cheap homes will flood the market driving down home prices and eating away at equity while at the same time the potential buyer pool will shrink from poor credit due to previous foreclosures and tighter lending restrictions and with less consumer buying power home prices will fall further until many markets reach the point where it will be cheaper to buy a home than to rent, because, after all, the landlords who own those rentals bought while prices were still dropping and consequently their rents have to be high enough to cover the monthly mortgage payment, assuming, of course, that they could get financing in the first place and are not yet in default themselves. (That has to be the longest sentence in the history of this forum)

Interesting. I did not know that!

Reading this was like 30 minutes on the treadmill. I'm out of breath. Thanks, jh. I can skip my trip to the gym this morning.