Existing
Home
Market.....................................................................D
Conditions in the existing home market are still deteriorating. Annualized home
sales fell to 5.04 million in September, equating to the lowest level since
September 2001, with existing home sales volume now down 19% over the last
year. In addition, the level of existing home inventory now stands at 10.5
months, a level last witnessed in July 1985, equating to a precipitous 44%
increase over the last year. All indicators point towards continued price
declines, and it is unlikely that we will stray from continued pricing pressure
in the coming months. Lastly, the homeowner vacancy rate increased during
Q3-2007, while the homeownership rate fell for the fourth consecutive quarter,
representing the longest string of declines ever for this indicator - dating
back to 1965. Affordability and
New Home
Market...........................................................................D-
The new home market continues to remain weak, with builder confidence now at an
all-time low, as the NAHB's Housing Market Index fell to 18 in October. Since
its peak in June 2005, the Housing Market Index has dropped 75%. New home sales
volume increased to an annual rate of 770,000, and the supply of unsold new
homes declined to 8.3 months, while median new home prices increased 5% over
the past year. Census Bureau new home metrics are notorious for drastic revisions,
so we do not put much weight in the slightly better numbers for this month
alone.
Housing
Supply................................................................................D
Builders continue to pullback on new supply, which will help the housing market
in the long run. Permit activity has fallen to a 1.22 million-unit annual rate,
with single-family permits declining to 868,000. Single-family permit activity
is now at its lowest point since April 1992, while total permit activity is at
its lowest level since March 1995. Starts continue to decline as well, falling
to 1.19 million in the last 12 months. Housing completions decreased again to
1.39 million, equating to a 31% drop over the last year.