By RYAN TAYLOR

New homes sales reached record lows in January as transactions fell 10.2% from a month ago to seasonally adjusted annual rate of 309,000. This annual rate is the lowest in the history of the reading which the government started in 1963. The median sales price for new homes also fell by 9.9% to $201,000.

The sobering reality is that jobless claims are now the biggest driver of the falling homes sales. When this downturn in housing began in 2005, creative financing had allowed people with jobs to buy houses they could not afford. But even if incomes and employment were still at those 2005 levels, that same buyer pool would not be around to buy up houses at today’s “cheap” levels. Buyers at those prices no longer exist for  three basic reasons:

1) They are still trying to stay in their current home by acquiring a modification for their loan.
2) They have been foreclosed on and their credit score is below 700.
3) They no longer have a job so they cannot afford to buy a home even if they wanted to.

These facts are especially bad for new homes sales as most new developments are located far away from job centers. Since foreclosures are now prevalent throughout the country, most people are deciding to buy homes closer to their places of employment so they can avoid the long commute. Furthermore, most of the areas that are in close proximity to job centers are more established and are generally viewed as a better investment.

Those buyers looking to purchase homes in areas with new homes for sale have quite a few properties on the market to choose from. REO properties are becoming more popular purchases because they are frequently cheaper. As modifications become more prevalent, buying an REO in a neighborhood with few “For Sale” signs will be seen as less of a gamble because most struggling homeowners will find it easier to receive some mortgage relief from their servicer. Additionally, these buyers are avoiding new developments because there are not enough other buyers to suggest that the development will acquire the prosperous feel that is often advertised by the homebuilders.

Those who do have jobs can afford to be selective and, as a result, will most likely choose a home in an established neighborhood that is close to job centers. This home will rarely be a new home.

Until a publicly traded homebuilder is forced to liquidate their portfolio of homes, new home sales will remain at historically low levels.

By RYAN TAYLOR

The National Association of Realtors announced yesterday that the median home price in the US fell by 12% from a year earlier. Not surprisingly, the fall in prices was driven by the ever increasing number of foreclosure sales which accounted for 45 percent of all transactions.

The pressure on prices is only increasing as job losses mount around the country. The US lost 2.6 million jobs in 2008 and has lost more than 600,000 already in 2009.

While we may sound like a broken record, we continue to believe that buying a house right now is a risky proposition. Unless Washington comes up with a plan where they make housing payments for unemployed workers (not terribly far fetched given the announcement yesterday to subsidize mortgage payments), the housing market will decline because job losses equal a decline in home prices.

The reality is that the pent-up demand often cited by homebuilders and Realtors is fading due the increased uncertainty in the broader economy. A trend being seen in previously strong markets throughout California is that potential buyers are holding back to due to uncertainty about their jobs. Even those with steady jobs are content to wait — houses will almost certainly be cheaper next month, and the month after — why buy now?

Furthermore, most of the homes on the market today are listed at prices that reflect an environment where demand remains strong. By in large, it’s not strong. Sellers will be forced to recognize this and slash prices — but this takes time.

Of course, the government will be working around the clock to speed up the demand process and you can trust that Cirios Real Estate will keep you informed on the latest developments in the market.

By AUSTIN NELSON

The National Association of Realtors (NAR) posted its monthly Pending Home Sales Index for September today, showing a pullback in the gains seen in last month’s report. The index, touted as “a leading indicator of housing activity,” is based on signed housing contracts. These contracts are not counted as sales but are taken as an indication of future sales data.

Specifically, the data show the following:

Month over month (seasonally adjusted)

• US: -4.6%
• Northeast: -16.8%
• Midwest: -0.7%
• South: -7.9%
• West: +3.7%

Year over year (seasonally adjusted)

• US: 1.6%
• Northeast: -9.4%
• Midwest: -3.1%
• South: -11.3%
• West: +39.5%

These monthly declines come following gains in August numbers (US up 6.5%). In last month’s report, the NAR pointed to the monthly figures as a sign of housing market recovery, but this month’s reversion evidences the continuing weakness of the market as a whole.

Now the polyannas at the NAR are choosing to focus instead on the year-over-year increase in the overall market, saying it indicates “we’re still in a broad period of stabilization.” However, the west region has shown a resurgence in sales and contracts are up almost 40% over this time last year, which is single handedly propping up the overall US numbers.

Taking the west out of the picture shows the US housing market as a whole continues to slide, where previously strong markets are beginning to show weakness in the face of continued economic crisis. The west is simply further along in the process of extreme market correction.

It is important to remember that this index should be taken with two very large grains of salt. The first is that these indices are based on housing contracts and do not represent completed sales. Fallout rates remain high, especially amidst a difficult lending environment.

The second, and more important, is that while sales volume may be stabilizing in some areas, sales prices are still unstable. With inventories continuing to hover at near record levels, downward pressure will still be exerted on home values.

Finally, unemployment data released today by the labor department indicate that unemployment is at a 14-year high of 6.5%. There is no reason to expect that this number will go down any time in the near future, as our economy is still locked into a death spiral of bad debt and tight credit.

This isn’t 2006 anymore, people who don’t have jobs don’t buy houses.

The former Goldman Sachs employees — err, the federal government — have decided to bail out Fannie and Freddie and the race to call another bottom in equities, not to mention housing, is on.

Reality, however, is not a friend of these hopeful bulls.

Let’s take a quick scan of the economic landscape and see what issues the latest bailout has solved.

• - The unemployment rate seems to only be going up, and unless the new federal agency charged with keeping tabs on the two mortgage giants is hiring en masse, there won’t be much of a change here.
• - The dollar could see its recent rally erased after our trading partners and investors around the world come to terms with the $200 billion the Treasury department just dumped into the blender to cut 50 bps off mortgage rates. And, take note, those are prime, Agency rates, and that’s it.
• - The unfortunate reality is that most Americans are still in debt and cannot afford a down payment on a house, a requirement that’s yet to be removed.
• - Gas prices have fallen, but not by as much as crude prices. Hurricane season is alive and well, threatening most of the gulf oil rigs. Oil companies are already under pressure from tumultuous markets for their black gold and are not likely inclined to lower prices further.

As painful as it is to admit, Fannie and Freddie probably needed to be bailed out to keep the entire financial market from collapsing but it doesn’t mean we are at “the bottom.”

It takes awhile for a fundamental shift in lending to play its way out and that is what we are in the middle of. The middle class is being squeezed more than ever and consumer credit quality on the whole is not going to start improving tomorrow.

More important than any of these points is we do not know what our friends at the government are going to do with Fannie and Fredie and how long it is going to take them to do it. In fact, trusting the very folks who ran these companies into the ground — albeit under different leadership — to turn them around is hardly a comforting proposition.

In the end, we need to remember that you need a good credit score and a down payment to buy a house in the real world. So no matter what a television analyst on TV who makes $500,000 a year tells you, this credit crisis is far from over.