New Home Sales Tumble in '06

[Jeff In Milwaukee]

NEW YORK (CNNMoney.com) -- New home sales plunged 17.3 percent in 2006, the biggest drop in 16 years, although warm weather in the Northeast gave a better than expected lift to December sales.

http://money.cnn.com/2007/01/26/news/economy/newhomes/index.htm?cnn=yes">Link

Lemme see...Sixteen years -- that would be 1990. So what they're saying is that new home sales are at their lowest point since the last time there was a Bush in the White House. Ever notice how many statistics fall into that same category? Deficits? Bankruptcies? Dead Soldiers?

[redqueen]

1. Ahhh, that's just a coincidence.

:sarcasm:

[OrangeCountyDemocrat]

2. Warm Weather?????

They're attributing a 1 month upward blip to warm weather?

[flamin lib]

6. Believe it or not, people will make a $200,000 decision based on

a bright sunny day. I'm an agent and I see it all the time. Home buying is a decision made in the heart, not the head. I try to keep my client's head in the game, but it's an uphill battle.

[Iwasthere]

3. Not tumbling in Costa Rica...

And thats where I am heading. And I am going to sell all my TVs etc... I can't take it anymore.

[flamin lib]

4. The other side of the home ownership thing is the foreclosure

rate which is the highest since the great depression (I think). Unless a link can be made between Administration policies and lending practices I'm not sure an association can be made.

The culprit is "creative lending" and the over sale of ARMs. If a buyer couldn't qualify for a home because the interest made the payment too high they were "encouraged" to take a 3 or 5 year adjustable rate mortgage. The pitch was something like, "Don't worry, they can't change the rate for 3 (or 5) years. Make your payments on time and then re-fi to a fixed!" Yeah, but if their credit was so thin that they couldn't qualify without manipulating the interest rate what are the chances? Not good as evidenced by the huge foreclosure rate. There's another wave coming too. What we're seeing now is the 3 year ARMs, the 5 year ARMs will kick in mid '07.

[haymark]

7. It's sad for those who were not smart enough to take a fixed rate

when they have thin credit. We need a law to protect stupid people.

[flamin lib]

10. Well, there's also loan fraud and mortgage fraud to contend with.

I was advised by a loan officer that the buyer (who had another home) needed to get a lease on the existing home so the fictitious income would off set the payment on the credit report. She said she did it all the time. I said it was loan fraud and took my client to another lender.

Mortgage fraud has just reared it's head and will be a major law enforcement issue for the next five years. The bad news is that HUD and the FBI are only investigating cases involving $millions. The good news is that if they come callin' it ain't about a fine, it's orange jump suit time.

edited to add:

The laws are there, it's just hard to find and prosecute the culprits.

[demnan]

15. I'm glad I refinanced my ARM when I did

no one wants to lend to a single woman in my income bracket, but after a year I got a fixed rate mortgage with 5 1/2 percent. I'm holding on to the condo.

[flamin lib]

16. You're one of the smart ones. Good on you!

Far too many questionable loans were made on the premise that you can always re-fi. It takes discipline to make the payments and not get into other debt that might disqualify you for re-fi. Buying a new car or furniture for the new home all affects the credit score.

I'm not sure about passing more laws but maybe one requiring counseling for people below a 600 score before they enter into a loan so they know what is necessary to re-fi later. Or for that matter to keep the home they buy.

[n2doc]

5. They are not saying that

They are saying that sales went down 17 percent, and that 17 percent drop is the largest percentage drop since 1990. But it does not say anything about the level.

FWIW, Sales last year were still the 4th largest in US history. But 2005 was the largest.

[PeaceProgProsp]

9. Every year the population is larger than it was the year before,

so aggregate home sales don't tell you that much.

What's important is supply and demand and prices and foreclosures and mortgage debt.

[Kashka-Kat]

8. What about OLD home sales?

I'd bet that a big factor in this is that there's a limited no. of people who are willing and able to afford the humongous McMansion type things which continue to eat up the countryside like metastatizing cancer and which continue to get built because a)it is... or was... profitable for the developers and b) because that's what zoning laws often require. It's actually illegal in many places to build the type of modest small homes which were commonly built yrs. ago (1 bathroom, close together to the other houses, etc.) My house doesn't even have parking-- and guess what, life goes on without it. Saved me a good 20- 30,000 right there....

It's just supply and demand.

[zonkers]

12. I can only imagine the electric b ill in those hard to heat/cool Mcmansions. I

have driven by a block of them in 90 degree weather. You can barely hear a bird over the collective hum of the A/C units.

[spinbaby]

13. Those McMansions are falling apart

The majority of the McMansions are built cheap. People I know who bought one from one of those mass-market developers are racking up astounding repair costs 10 years later. It's like it's built of cardboard.

[Warren DeMontague]

11. That's funny. Every time someone predicts that the bottom will fall out of the housing mkt in CA

it springs back to life.

Go figure. Must be a lot of people not getting the memo about how they're supposed to stop wanting to buy a house here.

[zonkers]

14. The bottom sure has fallen out in the past -- 90's. I dont think it will ever drop again

like that. That was a weird combination of a lot of things including the riots.

[AX10]

17. All is well!

:sarcasm: