Record Low New Home Sales In 2011

New home sales in the United States are on pace to set a brand new all-time record low in 2011.  This will be the third year in a row that new home sales have set a new record low.  Sadly, this is yet another sign that the U.S. economy continues to grow weaker.  Back in 2005, more than four times as many new homes were being sold as are being sold today.  The home building industry is one of the central pillars of the U.S. economy, and the fact that we are going to set another new record low for home sales in 2011 is a really bad sign for those hoping for an economic recovery.  Unlike most of those that work in the financial industry, those that build new homes produce something of lasting value for American families.  In addition, millions of Americans have traditionally made a solid living by building and selling new homes.  But today the market for new homes has totally dried up and large numbers of those jobs are disappearing.  Some of the reasons for this include high unemployment, a glut of foreclosures on the market and the tightening of lending standards on home loans.  In order for the U.S. to have anything resembling a healthy economy again, we are going to need a revival in the sale of new homes.

But unfortunately, it looks like things are getting even worse.  In August, the number of new home sales declined for the fourth month in a row.  That is a very troubling sign because typically summer is the best time for new home sales.

Celia Chen, the director of housing economics at Moody’s Analytics, is saying the following about the dismal numbers….

“With job growth at a standstill, the stock market swinging wildly, Congress wrangling over the debt ceiling and the euro zone’s problems sending consumer confidence down, sales of new homes are slipping from an already weak pace.”

When you take a close look at the numbers, it really is shocking to see how far we have fallen.

Back in 1963, the U.S. Census Bureau began monitoring new home sales.  Prior to the most recent economic downturn, the record low for new home sales happened in 1982.

In that year, only 412,000 new homes were sold.

Well, that record was broken in 2009.

Then it was broken again in 2010.

And it will be broken again in 2011.

This year, we are on pace to see only 303,000 new homes sold in America.

That is beyond pathetic.

To get an idea of just how bad that is, just check out the following chart which comes from the Calculated Risk blog.  The first number is the year, the second number is the total number of new homes sold during that year, and the third number is the total number of new homes sold through the month of August during that year.  The number of new homes sold during 2011 is a projected number….

2000:  877  608
2001:  908  644
2002:  973  670
2003:  1,086  759
2004:  1,203  841
2005:  1,283  906
2006:  1,051  756
2007:  776  577
2008:  485  365
2009:  375  261
2010:  323  231
2011:  303  211

As you can see, this will be the fifth year in a row that new home sales have fallen.

And yet the folks on television keep telling us that the recession is over.

The frightening thing is that new home sales are this anemic even with mortgage rates at historic lows.

So what is going to happen once mortgage rates start going up?

It is hard to imagine new home sales getting even worse than they are now.

And we desperately need to get things turned around.  New home construction is very good for the economy.

According to the National Association of Home Builders, each new home that is constructed creates the equivalent of 3 jobs for an entire year and generates approximately $90,000 in taxes.

So what is holding things back?

Well, for one thing, if people do not have good jobs they cannot afford to buy new homes.

Back in 1969, 95 percent of all men between the ages of 25 and 54 had a job.  In July, only 81.2 percent of men in that age group had a job.

That is a massive problem that needs to be solved.

Unfortunately, our leaders continue to allow millions of our jobs to be shipped overseas.

If you gathered together all of the people in the United States that are “officially unemployed” right now, they would constitute the 68th largest country in the world.  It would be a nation larger than Greece.

Secondly, there is a gigantic glut of foreclosed homes on the market right now that is competing with new homes for the few qualified home buyers that are out there.

It is absolutely shocking how many vacant homes there are in some areas of the country.

According to the U.S. Census Bureau, 18 percent of all homes in the state of Florida are sitting vacant.  That figure is 63 percent larger than it was just ten years ago.

In the city of Detroit alone, there are more than 33,000 abandoned homes.

Until the number of vacant homes goes down, there is just not going to be a need in the marketplace for a lot of new homes.

Sadly, it looks like another huge wave of foreclosures could be on the way.

According to the Mortgage Bankers Association, at least 8 million Americans are currently at least one month behind on their mortgage payments.

That is more than a bit frightening.

Thirdly, lending standards on home loans have dramatically changed.

Five or six years ago, if you were breathing you could get a home loan.

Even the family dog could get a home loan.

But now the pendulum has swung to the opposite end of the spectrum.

Applying for a mortgage today is like getting a series of proctology exams from a very rude and very uncaring doctor.

Many mortgage lenders today will deny you at the slightest hint of a problem.

Even if you have a very high income, near perfect credit, very little debt and a long history of financial responsibility there is still a very good chance that you will be turned down.

If you don’t believe this, just start talking to people that have applied for home loans lately.

A ton of pending home sales are being cancelled because potential home buyers simply cannot get approved.

Until some sort of “balance” is restored to the mortgage lending process, this is going to continue to be a major problem.

It would be nice if I could tell you that things are going to get better soon, but the truth is that there are all kinds of signs that the U.S. economy is getting even worse and there are all kinds of signs that the global financial system is on the verge of a massive nervous breakdown.

So if you make a living by building or selling new homes, you might want to find other ways to supplement your income for a while.

Things are not going to turn around significantly any time soon.

18 Reasons Why You Can Stick A Fork In The New Home Construction Industry

If you make your living by building or selling new homes in the United States, you might want to consider taking up a different career for a while.  New homes sales in the United States hit yet another new all-time record low in the month of February, and there are a whole lot of reasons why new home sales are going to stay extremely low for an extended period of time.  The massive wave of foreclosures that we have seen has produced a giant glut of unsold homes in the marketplace, mortgage lenders are making it really hard to get approved for home loans, unemployment is still rampant and the global economy looks like it may soon plunge into another major recession.  None of those things is good news for the new home construction industry.  The truth is that we were supposed to have seen new home sales already bounce back by now.  If you look at the historical numbers, new home sales in the U.S. always increased significantly after the end of every recession since World War 2.  But that did not happen this time.  Instead, new home sales have just continued to decline.  This is absolutely unprecedented, and economists are puzzled.  So what is going to happen if the U.S. economy suffers another major downturn?

New home construction has always been one of the foundational pillars of the U.S. economy.  When times were good new home construction would boom, and when times were bad new home construction would falter.

Well, unfortunately the industry is stuck in the midst of a multi-year decline right now.  The reality is that you can stick a fork in the new home construction industry in the United States.  It is toast.  There is going to be no recovery for the foreseeable future.

Not that previously owned homes are doing that much better.  According to the National Association of Realtors, sales of previously existing homes in the United States dropped 9.6 percent in February.  But at least sales of previously owned homes are not at all-time record lows like new home sales are.

As you can see from the facts posted below, new home sales are absolutely abysmal right now, and there are a lot of indications that things may get even worse.  The following are 18 reasons why you can stick a fork in the new home construction industry….

#1 New home sales in the United States set a brand new all-time record low in the month of February.

#2 Only 19,000 new homes were sold in the United States during the month of February. The previous record low for new home sales during the month of February was 27,000, which was set last year.

#3 The “months of supply” of new homes in the U.S. rose from 7.4 months in January to 8.9 months in February.

#4 The median price of a new home in the United States declined almost 14 percent to $202,100 in the month of February.

#5 The median price of a new home in the U.S. is now the lowest it has been since December 2003.

#6 As of the end of 2010, new home sales in the United States had declined for five straight years, and they are expected to be lower once again in 2011.

#7 Now home sales in the United States are now down 80% from the peak in July 2005.

#8 New home construction starts in the United States fell 22.5 percent during the month of February.  This was the largest decline in 27 years.

#9 In February, the number of new building permits (a measure of future home building activity) declined to the lowest level in more than 50 years.  In fact, new building permits were 20 percent lower during February 2011 than they were in February 2010.

#10 There is a major glut of foreclosed homes that still need to be sold off.  David Crowe, the chief economist for the National Association of Home Builders, recently told CNN that the constant flow of new foreclosures being put on the market is a huge hindrance to a recovery for new home sales….

“One of the biggest detriments to building new homes is the flow of existing foreclosed homes.”

#11 The number of foreclosures just continues to increase.  This means that those trying to sell new homes are going to continue to be competing against a giant mountain of foreclosed homes for the foreseeable future.  An all-time record of 2.87 million U.S. households received a foreclosure filing in 2010, and that number is expected to be even higher in 2011.

#12 In fact, there are a whole lot of signs that there will be very high levels of foreclosures for years to come.  For example, according to the Mortgage Bankers Association, at least 8 million Americans are at least one month behind on their mortgage payments at this point.

#13 A stunningly high number of Americans are “underwater” on their mortgages right now.  This could lead to an increase in the number of “strategic defaults”.  31 percent of the homeowners that responded to a recent Rasmussen Reports survey indicated that they are “underwater” on their mortgages, and Deutsche Bank is projecting that 48 percent of all U.S. mortgages could have negative equity by the end of 2011.

#14 The truth is that the U.S. doesn’t need a whole lot of new housing at the moment.  Right now, 11 percent of all homes in the United States are currently standing empty.

#15 Mortgage lending standards have become extremely tight.  Back during the housing bubble, almost anyone that was breathing could get a zero-down mortgage.  Today, mortgage lenders have made it extremely difficult to acquire a home loan, and it is quite typical these days for lenders to demand down payments of 20 percent or more.  This is dramatically reducing the number of home buyers in the marketplace.

#16 American families cannot buy homes if they do not have good jobs.  Unfortunately, it has become extremely difficult to find a job in the United States today.  This is especially true if you are looking for a good job.  It now takes the average unemployed worker in America about 33 weeks to find a job.

#17 There is not going to be a jobs recovery until the overall economy improves.  Unfortunately, the price of oil continues to rise dramatically and economic disasters all over the planet threaten to plunge the global economy into another major recession.

#18 On top of everything else, perceptions regarding home ownership are shifting in the United States.  In 1996, 89 percent of Americans believed that it was better to own a home than to rent one.  Today that number has fallen to 63 percent.

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