Catastrophe Worsens for Housing Market — Home Prices and Home Sales Fall Again

As Congress meets to bailout the financial industry and George Bush vies with Freddie Krueger for the nation’s archetypal face of visceral terror, the latest report from the Census Bureau shows that the housing catastrophe continues to get worse. 

Here’s the summary of the bad news:

• New homes sales in August dropped to the lowest level since January 1991.
• Home prices hit a four-year low. 
• Inventory continues to rise, creating more downward pressure for home prices.

And here are some of the ugly new numbers:

• New home sales had a seasonally adjusted annual rate of 460,000, down 11.5 percent from a revised 520,000 in July and down 24.5 percent from a year ago.
• Only 39,000 new homes were sold in July, the lowest level since December 1991.
• Prices for new homes were at their lowest level since September 2004.
• The median price of a new home sold in August was $221,900, down 5.5 percent from $234,900 in July and down 6.2 percent from $236,500 a year ago.
• 166,000 new homes came on the market in August, bringing total inventory to a seasonally adjusted 408,000, equal to 10.9-month supply, up from a 10.3 month supply in July.
• New home sales fell 31.9 percent in the Northeast, 2.1 percent in the South and 36.1 percent in the West. Only the Midwest showed an increase in new home sales, up 7.2 percent.
• Three out of four builders reported having to pay buyers’ closing costs or offer other incentives such as expensive features for free in order to maintain sales.

The housing market is so bad that the main cheerleader for an I-can-see-the-light-at-the-end-of-the-tunnel approach to the real estate crisis – the National Association of Realtors (NAR) – has finally admitted, albeit with NAR’s typical understatement of the obvious, that “the pendulum in the mortgage market has swung too far.”

But if you’re looking for a bright side to the nation’s residential real estate fire sale, NAR’s number one Pollyanna-in-Chief, economist Lawrence Yun, still has a bromide to offer.

“August sales reflect higher interest rates before the government takeover of Freddie Mac and Fannie Mae, and the sudden drop in mortgage interest rates over the past couple weeks is improving housing affordability,” Yun said. “With higher loan limits and a beefing up of the FHA program, all the mechanisms have been falling into place to increase mortgage availability.”

Yeah.  Right.

Home Prices Fall Again — Down 15.8% From Last Year

According to the Standard & Poor’s/Case-Shiller Index, which measures the sale price of existing single family homes in 20 major metropolitan areas, prices fell another 0.9 percent in May 2008,  and were down 15.8 percent from May 2007.

File this information under “Tell Us Something We Didn’t Know.”

Actually, we knew it was bad, but we didn’t know it was this bad.

The Standard and Poors Report states that “For the second straight month, all 20 MSAs posted annual declines, nine of which are posting record lows and 10 of which are in double-digits. Both the 10-City Composite and the 20-City Composite are reporting record low annual declines.”

“Since August 2006, there has not been one month where we have seen overall price increases . . . For the month of May, markets that experienced large gains in the recent real estate boom continue to be the biggest decliners. Miami and Las Vegas were the worst performers returning -3.6% and -2.9%, respectively. On a brighter note, Charlotte and Dallas have recorded three consecutive months of positive returns. These two markets are also showing the smallest annual declines, with Charlotte own 0.2% and Dallas down 3.1% versus May of 2007. From a longer-term perspective, since January 2000, the best performing markets are Washington, Los Angeles, New York and Miami. The value of housing in Detroit is lower than it was in January 2000. Over the month, no region reported gains in excess of 1%. But for those that reported monthly declines, three were in excess of 2%.”

And with the credit market frozen, there is no end in sight to falling home prices and the housing crisis, now rapidly becoming the housing disaster.