The National Association of Home Builders index for November is yet another record low. This drop was into single-digit territory with the index falling to 9, under the low of 14 put from last month. The 50 level is the dividing line with above 50 as good and under 50 as bad. But it gets worse…
This is the lowest level since the index was created in 1985. Justyesterday, the same organization showed that HOUSING AFFORDABILITY roseto its highest level in four years. If you want a prediction from 24/7 Wall St. here it is: affordability will continue to get more affordable, at least if incomes hold.
The NAHB Chairman said that this shows that we are in a crisissituation; and if there’s any hope of turning this economy around,Congress and the Administration need to focus on stabilizing housing.The Chairman also said that it is going to take major incentives tobring buyers back since economic uncertainty has driven consumers fromthe housing market.
The news just gets worse for Joe Public, or at least for Joe Homeowner. The single-family homes fellto 8 in November, also down from 14 in October. Traffic fromprospective buyers is also falling out of bed down to 7 in Novemberfrom 14 the month before.
We have noted this before and it is something to consider as the"existing economy" or barter economy rather than the manufacturingeconomy. While some home sales figures are showing some gains, that isnot the case in new home sales. Existing home sales at lower pricesand foreclosure sales in recent months have been what was giving somehope.
Mark our words, "Housing DOES still have lower to go." You cannot havea healthy housing market with only foreclosures and secondary homesthat people are having to sell off. If you lived in Texas in the1980’s, you know that it can take a decade. There were just too manyhomes built in the 2000 to 2008 period.
These guys do not need a bailout. The nature of construction isconstruction to destruction. Builders will overbuild until the pointthat the banks won’t loan anymore money. I see it every day in myneighborhood and it is sickening. The builders are going to have tomake a living doing remodels and repairs again. They will also justhave to pray for more hurricanes and earthquakes.
The latest round of new incentives hardly did anything and it franklyis not going to matter what incentives are offered if people think thatthey can buy a house far cheaper in a few months. Many people areworried about job security as well, and we all probably know too manypeople who are now unable to move to a new job because they arefinancially under water in their houses.
Housing used to be very different. You bought and held for many yearsand made a lot of money. Or you bought a house thinking the tax write-off would be the equivalent of a large renter’s rebate when you sold.
Don’t expect any major changes for the very near future. Even newincentives to buy or new government- mandated foreclosure-avoidancepackages will only keep some of this at bay. Sorry to bring more badnews, but this is the cruel part of the business cycle that just has tobe worked out through time.
Jon C. Ogg
November 18, 2008