Housing Perspective: December New Home Sales
By RYAN TAYLOR
The Commerce Department reported a 14.7% drop in the seasonally adjusted rate of new home sales in December. Builders unloaded just 482,000 homes, the lowest number since 1982, while the median price slipped 9.3% from December 2007 to $206,500.
Tough to find a silver lining in this release, the numbers pretty much speak for themselves.
Homebuilders are literally drowning in their own supply, as ill-fated decisions to keep building through the early stages of the housing downturn are coming back to haunt the likes of Centex, Toll Brothers and Lennar. The data could not be more clear: Buyers are not willing to pay for new homes at their current prices. Nevertheless, the homebuilders, completely out of touch with reality, are begging Congress to pass legislation to encourage buyers to step back into the market.
With so many foreclosures in areas inundated with new construction, potential buyers are opting to pay far less for houses just a few years old, while the new ones sit vacant. Builders can’t lower their prices to compete at market levels, as the losses would likely put many out of business.
Which is exactly what needs to happen.
As I have written previously, there will be no bottom in the housing market — or even meaningful stabilization — until at least one, if not more of the major homebuilders goes under. The alternative, which would dramatically extend any future recovery, would be an auto industry-style bailout.
These unnecessary zombies of companies need to start feasting on one another before their industry can return to normalcy. The time for consolidation is now!
Tags: bottom, centex, construction, homebuilder, Housing, lennar, toll brothers