New home glut: Inventory at 27-year high

Breaking news from MarketWatch: "U.S. home builders have slashed their prices by a record amount, but sales still plunged by 8.5% to a 17-year low in March, the Commerce Department estimated Thursday ... the supply of homes on the market rose to 11 months, the most in 27 years....                     

"Inventories are likely understated as well because of canceled sales contracts."

From the New York Times: "Sales of new homes in March plummeted to the lowest level since the housing recession of the 1990s, the government said on Thursday, as inventories rose to the highest point in more than a quarter century."

The spin you hear from the real estate industry is that falling prices will attract new buyers. It is just as likely the opposite is happening right now: falling prices are scaring buyers. Again from the N.Y. Times: "Prices continue to fall as well, which could discourage would-be buyers from entering the market. The median price of a new home dropped in March to $227,600, down 13.3% from a year ago."

Analysis: This is a pretty big economic problem. Home-building is at a standstill because of the inventory glut. It doesn't make sense to build homes if you can't sell them.

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: Catalist Homes

Comments

[grow]

ha, ha, ha, welcome to a new world order. greed is not good.....

[steve]

This is just the begining,It will get worse before it gets better.If I hold out long enough I might actually be able to afford a house in a nice area.

[MyLessThanPrimeBeef]

You live by the herd, you die by the herd.

And the herd will pile into an ever more absurdly expensive housing market with as much enthusiasm as the herd will stampede out of a depreciating market.

[mike]

this problem does not affect los angeles where the demand is still relativly high

[anon]

One of our Mexican friends told us he and his fellow workers were relocating to Brazil due to the lack of construction work in the USA now.

[Raul Garcia]

This is just the beginning of the collapse of the biggest and most corrupt Ponzi scheme in the history of mankind.

To top it off the government used our tax dollars to bail out one the worst abusers.

[Nirad]

The only loans allowed now are those with 20% down, but those few who actually have 20% down don't want to run the risk of losing a substantial portion of that down payment. When you consider that the average homeowner only stays in their house for 5 years, and that housing slumps take a long time to correct, the potential for losing some or all that 20% is high. Obviously, the banks know this, which is why they won't accept less than 20% down.

[Mike]

Maybe my wife and I will actually be able to buy a house eventually which we haven't been able to afford even with a $125k salary! It's ridiculous. All these schmucks that bought more house than they could afford now want the gov't to bail them out? How is that? I have a couple thousand on my credit card, can the gov't pay that off for me?????

[Tony W]

Flip that house now you greedy scammers!

[Bruce]

It appears qualifying for a loan is a problem now that the lenders require something down and verification of income This may be a long term change and will effect new home sales and re-fi too. Appraisals will become more strict as comps head downward. All the factors that lead to this run up in prices are being reversed with the predictable results.

Looks like everyone is investing in wheat now!

[Patrick Duffy, HousingChronicles.com]

It seems that there's this big presumption out there that this will be contained to the housing market and that everyone not working in real estate will keep their jobs and be able to pounce once prices decline. But what if you lose your job because of a deeper and wider recession, your credit tanks and you can't find another job that pays as well as the last one? I know people who are losing jobs in all fields completely unrelated to real estate due the current environment. What do you intend to use to buy that new home down the road -- anger?

[slimboy]

Take notice all you existing home sellers:

For those of you trying to sell your home for more than DOUBLE what you paid for it just three or four years ago, THAT SHIP HAS SAILED!

I'm talking to you people -- yes, you on the "west side" and Mid-city. Your home ISN'T worth over a million. Not even 700,000! GET OVER IT!

[ruthless genes]

the only thing to export now is debt... sweeet.

[Graham]

This is a great time to secure lease/options from small builders. Just make sure your option price accounts for more decline.

www.creditstockpile.com

[the descendants]

This is only a sign of bad things to come. Things will only get worse...we must approach the darkest hour before the sun will rise again.

There is a rumor that the bloodline actually exists.

And the evidence is now in human form.

[Eric Werner]

People ("experts") as well as the media keep acting like this wasn't coming. I mean, come on! With California's high property taxes, maintenance etc., I'm not buying a home until I get a manageable, fair mortgage to pay. The simple fact is the product is WAY overpriced for the middle class.

[Jeff W]

What do you mean? Affordable housing? Still unaffordable for this middle class wage earner.

[CrabsnCancer]

The reason nobody is buying homes right now is because of the difficulty in being able to secure loans. Home prices during Mid-Boom were un-affordable per se... but people were able to get easy, no-qualify 0% down loans. Because of that disaster, loan institutions have tightened up and with no free-flow of money the market is realizing that Home Prices are way too expensive for the average Joe to afford a home at a conservative and secure loan.

[John]

first they ran up the tech bubble, than they ran up housing, now there running up commodities, fuel, rice gold. WWWWHHHHEEEENNNN will this stuppidity stop

[Duncan]

This problem doesn't effect Los Angeles? Wow, now that's someone in denial. Look at the picture genius. That's Gardena.

[whoops]

housing down 2% in some areas, and 30% in the desert.. go figure!!! if the government bails these people out it will stablize home prices, and cause a phoney floor that would make it ever more impossible to own a home with any value...

[Anne]

Mike: you are either in great denial, or you aren't paying attention. This problem -directly- affects Los Angeles. Just look at this: LOS ANGELES 493 (sold houses in March) $505,000(march price 2008) $589,500 (march price 2007) -14.33% (Change year-to-date).

For those of you that think Los Angeles is immune, you have to realize that the true"high end" Beverly Hills homes are keeping the statistical data skewed to the high. Los Angeles county's year-to-date change in house prices was -18.52% and certainly will only go further in decline.

I think the denial is fueled by greed.

[doom]

Take a good look at the picture. Notice anything?
Where are the businesses? Where are the farms? Where does the money come from to live in this kind of ecological and social dysfuntion? Well it only works if the USA borrows a Billion dollars a day from China. You should all buy canned food and a gun while you still can! And when all you yuppies die, rest assured your great Grandparents will be waiting in the "here after" to slap you in the face. frick'n idiots! Real estate is not a profession - its the avoidance of a profession! GET A REAL JOB AND MAKE A REAL AMERICAN PRODUCT stop being a disgrace to your country

[Rob Bachorik]

Excellent, it's about time to put out of business the filthy developers. I wish extremely tough economic times on all of them. Maybe some environmental law suites will follow!

[Thomas Kessler]

Can't help but disagee about demand in the LA area, I have seen 4 houses go up for sale and aren't moving in Pasadena on my block