Glut: 5.1 million homes for sale

A major homebuilder warned this morning of the growing problem of "surplus inventory" as another month of weak sales of new homes left the inventory of unsold new homes at 529,000, and the total number of homes for sale in America at a staggering 5.1 million.

Inventory of unsold homes has spiked 14% in the past year, and 77% from August 2004 levels (see chart below).

Homebuilder KB Home reported a 32% drop in third-quarter revenue and warned that inventory will continue to rise, driving prices lower: "We expect housing industry conditions to continue to worsen through the end of the year and into 2008," said Jeffrey Mezger, president and chief executive officer. "Rising foreclosure rates are intensifying the problem of surplus inventory and will likely drive further home price reductions."

Mezger says the "oversupply of unsold new and resale homes" has worsened in many markets. "At this time, we see no signs that the housing market is stabilizing and believe it will be some time before a recovery begins," he said.

Reuters on new home sales: "Sales of new single-family U.S. homes fell 8.3 percent in August to a 795,000 annual sales pace, its slowest rate in over seven years, while the inventory of homes dropped, a Commerce Department report showed on Thursday."  Inventory dropped 1.5% from July to August, and stands at 529,000.

The National Association of Realtors reported earlier this week there are 4.58 million existing homes for sale, which represents a 10-month supply of homes at the current pace of sales.

Stats:
Month     Total homes for sale Existing homes   months to sell  New homes months to sell
Aug 07    5.11 million           4.58 million       10.0 mo.         529,000      8.2 mo.
Aug 06    4.49 million             3.92 million         7.5 mo.         568,000      6.6 mo.
Aug 05    3.34 million             2.86 million         4.7 mo.         479,000      4.7 mo.
Aug 04    2.88 million             2.48 million         4.6 mo.         404,000      4.2 mo.
Sources: NAR (Existing homes), Commerce Dept. (New homes)

Comments? Insights? Email story tips to lalandblog@yahoo.com.

Comments

[xtine]

Peter, I am so confused about the organization and point of your last post.

KB reports inventories of 5.1.
Metzger reports an oversupply and worry over the future market.
Then Reuters says inventory DROPPED.
Then NAR reports 4.85mil inventory.

Confused. Headache. Help.

[Rob]

regional breakdown would be useful, but i guess that would detract from the desired effect

[Pete Viles]

xtine wrote: "Peter, I am so confused about the organization and point of your last post."

Thanks for the comment and sorry for the confusion. The point is that inventory of new and existing homes has risen to 5.1 million -- that is, the 529,000 unsold NEW homes reported today plus the 4.58 million EXISTING homes reported earlier this week by NAR. KB Homes did not report these numbers -- I did.

Yes, the freshest news is that inventory of new homes dropped very slightly, to 529,000. But when added to the 4.58 million unsold existing homes reported early in the week by the NAR, you get rising inventory of all houses on the market, even though the smaller of the two numbers declined slightly month to month.

KB Homes is warning that this problem of "oversupply" is worsening and driving prices lower.

I hope that clears it up.
Pete

[David]

The continued reportage of conflicting statistics, or statistics tailored for a point of view, has as much to do with the current state of the real estate market all over the country as the foreclosure rate.

[Richard Allen]

$500K for a starter home? Are you nuts in CA? There is going to be a world of hurt for lots of people in America. And it's ALL SELF INFLICTED...No one forced you to sign on the dotted line.

Sad but true, lots of homes that could be used to house people will have to be bulldozed in Florida because you cant leave a house closed up in a humid area, mold, warping, rotting....

Such a terrible waste of resources, and yet i have no health insurance....because i make too much money at $11 hr.

The only way out is PAIN or inflate the money like Zimbabwe and raise the minimum wage to $25 hr

[Jack D]

A housing bust delivered via the illegal Federal Reserve (it's a private company, so it is not 'Federal and it certainly has NO reserves) and their paper money, yet another infringement on our rights by the gov't. Add it to the ever-growing list of violations:
They violate the 1st Amendment by opening mail, caging demonstrators and banning books like "America Deceived" from Amazon.
They violate the 2nd Amendment by confiscating guns during Katrina.
They violate the 4th Amendment by conducting warrant-less wiretaps.
They violate the 5th and 6th Amendment by suspending habeas corpus.
They violate the 8th Amendment by torturing.
They violate the entire Constitution by starting 2 illegal wars based on lies and on behalf of a foriegn gov't.
Support Dr. Ron Paul and save the US economy.
Last link (unless Google Books caves to the gov't and drops the title):
http://www.iuniverse.com/bookstore/
book_detail.asp?&isbn=0-595-38523-0

[calihome_fantasy]

Richard Allen's sentiment is mirrored among the new 30-somethings. We all just kind of resign to the fact that it would be insanity to buy a tiny "starter house" at 500K in some remote region of California. The money is better spent in other kinds of investments inside and outside of California. For the lucky who are inheriting houses, I hope you can afford the property tax.

[La]

Can ANYBODY put a positive spin on this . . . the press has a remarkable ability to do it on most anything else . . . . just maybe if we can get average folks to believe the sky isn't falling in spite of the reports

[Michael Snyder]

Ten million homes on the market; what a wonderful opportunity!! I've built my contracting buisness through Realtors & I've a few observations on our current situation: The number one problem is in getting Investors willing to underwrite loans in a market dominated by jumbo's with no protection other than the buyer's credit and equity. The House reciently passed a bill, HR 1852 raising the limits in Federally guaranteed loans to $700,000. This measure is now languishing in Senate Committee where it will no doubt grow pork and unrelated measures before being sent to the President's desk for veto. Please write our Senators about this measure. Statically, politicians see one written communication as expressing the views of a hundred people. That's leverage!
Prices are "correcting" and last years comps won't work. Just more of the lending conundrum that will work itself out with a lot of realistic , responsible Realtors. Speaking of which, while many are rending their clothing and bemoaning their fate and market woes, others I know will close four escrows next month and their pipeline is full into the Holidays; which brings us to the bottom line. The Chinese ideogram for danger is crisis and opportunity and their are many opportunities in these dangerous times.

[MyLessThanPrimeBeef]

Being a patriot, I propose this solution.

Why don't we ask Caltrans to move all the excess unsold new homes to India and China where jobs are?

Not only will this help with the current housing glut, but it contributes positively to the trade deficit problem.

[Inland Empire]

According to someone I know who lives in a KB home, they are not as well constructed as their peers. Perhaps this has something to do with why they are not selling well.

[Ron Ballard]

Having worked for various mortgage companies for years now, I can tell you the supply of vacant houses here in Florida will continue to rise. New developments continue being built and people are walking away from homes at an alarming rate. In addition to my increased workload from month to month, my realtor friends haven't sold a house in months. In most cases people say they want to buy a new house but can't sell their existing house

[Jason s]

Richard Allen - based on your comments it's obvious why you make only $11 an hour.

[Aaron]

50% off sale coming to a Open House near you.
Tred lightly falling homes prices are the norm.

[RodTfactor]

Dear Robert, why don't you buy your own health insurance? increasing the minimum wage is not the answer because everything will have to adjust to the new cost and believe me companies will be laying off more workers to afford higher wages. I't is not the governments job to take care of you, get a better job

[R.C.]

If the major home builders will just stop building inventory homes for a few months, maybe things will stabilize.

[Unpopulardude]

Sure. I can put a positive spin on this. Young couples who are saving their money will be able to buy a house with an aftertax cost similar to renting in a couple of years.

Here is a second positive spin: more people will actuarlly be saving and investing. Recently, house payments have been so large, and down payment requirements so small, that many homeowners didn't save.

[jb]

Mortgages are not the problem. Overpriced housing driven by greed and fraud is the problem. Do the standard calculations comparing your income, rental costs, etc and you will know what you can afford. Dont catch a falling knife.

[Jonah]

"Sure. I can put a positive spin on this. Young couples who are saving their money will be able to buy a house with an aftertax cost similar to renting in a couple of years. "

"Here is a second positive spin: more people will actuarlly be saving and investing. Recently, house payments have been so large, and down payment requirements so small, that many homeowners didn't save."

LOL...sounds economically balanced to me!

[Rick S.]

David wrote

"The continued reportage of conflicting statistics, or statistics tailored for a point of view, has as much to do with the current state of the real estate market all over the country as the foreclosure rate."

Of course reportage affects the market, but I think the state of the market is also very much to do with fundamentals. The housing stock nationwide is still overvalued. The 100% price runup from 2000-2005 was a speculative bubble and it finally burst. This brought on the increased rate of foreclosure, and the corresponding tightening of credit, which has in turn pushed prices down further.

This is not all bad, in fact, in the main I think a rollback could help a lot more people than it hurts. Flippers, realtors, tax assessors, and builders might not fare so well, but first-time buyers and those wishing to move up-market will see lower costs.

[steam3]

Problem with the article is it's written in a vacuum. 5.1 mil houses SOUNDS like a lot--maybe it is , maybe not. Compare it to similar figures in Sept 2006, Sept 2005, Sept 2004 and the data would nmean something. Without it information, this article is worthless!

[Melissa Arnold]

To La who said, "Can ANYBODY put a positive spin on this . . . the press has a remarkable ability to do it on most anything else . . . . just maybe if we can get average folks to believe the sky isn't falling in spite of the reports"

Part of the answer is giving people the homes they want. Builders can't afford to keep building the same old houses over and over again and expect them to sell. Buyers are rethinking their lives and their budgets. For the money they're spending, they want a home that truly fits their lives. That's why the new Woman-Centric Matters(sm) program is working well for the builders smart enough to take the leap. Floor plans that address de-stressing, entertaining, storage needs and flexible spaces that can be adapted as lifestlyes change. Builders in the program are not only weathering the current downturn in the market, but thriving. And homebuyers are loving it. www.womancentricmatters.com

[eddie willers]

A tighter credit market will also actually reward those of us who have maintained above average credit, since the days of sub prime NIV-NAV (LIAR LOANS) and approving deadbeats who are fresh out of bankruptcy are finally GONE! Hopefully the 30 year (or less) fixed rate will again become industry standard. Prices will adjust to accommodate a sane market.

[Pete Viles]

Steam3 wrote, "Problem with the article is it's written in a vacuum. 5.1 mil houses SOUNDS like a lot--maybe it is , maybe not. Compare it to similar figures in Sept 2006, Sept 2005, Sept 2004 and the data would nmean something. Without it information, this article is worthless!"

Steam3 -- fair points, all of them. I just ran those numbers and will update the post momentarily. But here is your sneak exclusive, personal preview: total inventory of 5.1 million in August is up 14% from last August (4.49 million), and up 77% from 2004 levels (2.88 million). Supply as expressed in how long it would take to sell off has more than doubled in three years, from 4.6 months in August 2004 to 10.0 months in August 2007.

[Jay Michaels]

Buy now sheep before prices go down any more. Before there are only 5 million 999 thousand 999 homes for sale!! The idiots are building 5 million dollar homes near me in a white trash suburb of Boston. who is doing jumbo loans?????? They still built amazing!!