New home sales fell by nearly one-third last month versus April with the end to the Federal government's $8,000 home-buyer tax credit. New home sales at 300,000 followed a downwardly revised 446,000 during April.
It was a record low for the series which dates back to 1963. The latest level was well short of Consensus expectations for 420,000 sales.
Can't pay your mortgage? Don't worry the state will pay it for you!:
Michigan’s plan to spend $154.5 million in federal funds to help those hardest hit by the economy has gained federal approval and will be available starting July 12.
The funds – targeted at helping borrowers facing pay cuts or job losses keep their homes – are expected to aid more than 17,000 Michigan households.
Until then, Michigan State Housing Development Authority officials will educate banks and credit unions about the process of evaluating borrowers for the program. Borrowers must apply with their lenders to take advantage of the lifeline, which will be awarded on a first-come, first-serve basis.
Has the world gone mad????? How on earth is this going to be productive? Will these borrowers all of a sudden be able to afford their house 12 months from now? Talk about a total waste of money.
We have already seen a 50-70% re-default rate on modified mortgages. Why on earth do they think this is going to solve the problem?
The government needs to be face the music: Millions of people bought houses they could not afford using lending products that are no longer available.
Pissing away billions trying to keep them in these homes is nothing but a total waste of money that we don't have!
I understand that the housing tax credit may have skewed this number a tad but let's put this into perspective. In 2007 (after the housing bubble had peaked) we still sold 769,000 new units according to Haver. Yesterday's number was more than 50% lower.
The median home price also dropped to $200,900 which is the lowest number since 2003. Think about this one for a second: Prices are collapsing at a time where we are seeing the lowest mortgage rates in history!
What this tells you is that America has lost interest in owning a home. The psychological damage has been done. As prices continue to fall, potential home buyers stay on the sidelines because they are petrified that they might lose money on their home.
Homes are now looked at as a place to live versus an investment. Once this mindset sets in it's very difficult to change it. What we are seeing now is a classic example of how deflation sets in on a specific asset. The more prices drop the more people stay on the sidelines which then triggers more price drops.
It's called a negative feedback loop (otherwise known as a deflationary death spiral). This is how bubbles pop and we are seeing it now in housing.
One more question to ponder: Can you imagine what the home sales numbers will look like when rates start moving higher and/or when the weather starts to get cold? Yikes!
I will leave you with this one piece of advice: Stay on the sidelines if you are looking to buy a house because this housing unwind hasn't even gotten into full gear yet.
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