January New Home Sales Tumble
Today, Bloomberg reported that January new home sales dropped substantially, and standing inventory is at an all-time high. Wasn’t it just two weeks ago that we were discussing record new home starts—big numbers not seen in over 33 years?
Hmmm… This news kinda makes you want to sit back and think a little…
Let’s see… January housing starts were 2.276 million (per annum), equating to roughly 190,000 home starts. Today, news reports that January new home sales were down to 1.233 million (per annum), equating to roughly 103,000 home sales. It doesn’t take a rocket scientist (which I’m certainly not) to see that the US housing industry has just added 87,000 excess homes to the market in January 2006. These new homes (once finished) will add to the record number of homes already for sale nationwide (currently 528,000 total).
When you combine the housing information above with (1) The lowest personal savings rate since the Great Depression, (2) Consumer Bankruptcies at an all time high, (3) Increasing interest rate environment, (4) Rising Energy Costs and instability in world oil markets, (5) Continued US Outsourcing and loss of US job market, (6) Failing corporations--GM, Delphi, Ford, US airline industry, etc, (7) Increasing Trade Deficit and US Debt, (8) substantial US dollar problems, (9) Inverted Yield Curve, (10) complete lack of US Government interest in getting our economic house in order, and (11) $1 + Trillion dollars of Interest rate resets in the next 18 months, etc… what do you think will happen to the housing market and our economy? My thoughts: I believe it will be an American Wake Up Call
Anyway, based on the figures released today and the prevailing trend, it’s almost certain the US housing market will continue to cool. If it cools too fast, the abrupt economic fallout could be severe. If it cools slowly, it will be less painful, but any one of the other issues I listed above could create their own potential problems and economic fallout, thus adding to the misery.
Either way, our future doesn’t look nearly as bright as our past, and the housing ATM is going the way of the US government and consumer—completely broke.
This is a very interesting, yet scary time to be alive.
I’ve written other articles about these same issues, and you can read them here, here, here and here.