Market Minds

Floyd Norris cuts thru the bull to take a closer look at massively overbuilt New Home market: “For more than three decades, the sales volume of existing single-family homes and newly built houses tended to rise and fall by about the same percentage, as can be seen in the accompanying charts. To be sure, sales of new homes did tend to do a little worse during recessions, but the difference was small and short-lived.” See the two charts below — the first one shows sales volumes (all homes) from 1975 - 2009 (three-month moving averages) Below that is the chart of showing how far sales fell from peak levels during each downturn. As Norris notes, “the plunge in sales of existing homes is severe but not unprecedented. But new-home sales are now running at only about a quarter of peak levels, a fall far deeper than anything seen since the statistics began being collected in the 1960s..” Here are the charts in question: > click for bigger graph Norris continues: “At the peak of the housing boom in 2005, sales of both existing and new homes were running at twice the 1976 rate. This year, the sales rate for existing homes seems to have stabilized at about one-third higher than the 1976 rate. New-home sales also seem to have stabilized, but at about half the 1976 rate

See the article here:
New-Home Sales Suffer More than EHS This Recession