Average New Home Price Lowest in 8 Years
HT: Zero Hedge
CARPE DIEM
Professor Mark J. Perry's Blog for Economics and Finance
Monday, November 28, 2011
HT: Zero Hedge
About Me
- Name: Mark J. Perry
- Location: Washington, D.C., United States
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
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9 Comments:
and yet new home sales remain at their lowest ebb in 60 years.
http://www.calculatedriskblog.com/
not all price declines spur demand. some are a function of its absence.
new home sales are not even 1/3 of the 2003 level and down 80% from the peak.
the 25% drop in price has not driven any additional demand at all.
one would expect low mortgage rates to make the price elasticity even more pronounced, but it has had no effect either.
some of this can certainly be blamed on the large gap between existing home and new home prices, but the performance of the overall mortgage application market and sales of all homes really look no different than the new home sales chart in terms of their shape/behavior.
i suspect the real culprits are negative equity in existing homes and tightened lending standards.
these demand killers will prevent the price moves from driving much in the way of additional demand driven by price. each dip in existing prices takes away buying power from existing homeowners.
only those who do not own a home are not so affected, and they are not much of the market, especially now when down payment requirements are high, credit scores need to be perfect, and unemployment is so high.
this is the problem with a real estate crash. price reductions do not drive aggregate demand like they would for a car or a vacation, and the debt does not go away.
http://www.calculatedriskblog.com/2011/11/new-home-prices-average-lowest-since.html
sorry, link should have been this one.
Context! PLEASE!
how about.... in constant dollars?
or how about
as a percent of mean income
or.....
some other metric that puts it in context....
I guess all those postings predicting a major increase in housing sales and prices were wrong. At the 2001 peak it took 540 ounces of gold to buy the average home. Since then we have seen homes fall to 18% of the original price. If we look at the average ratio since gold became a legal investment we find that one could have purchased a home for around 290 ounces. At 96 ounces today that is about a third of the average price.
Now this could mean that gold will come down with respect to homes but it could also mean that the housing bubble has done a huge amount of damage that the market does not anticipate ending in the near future. The bigger question is what happens to the currency once the crisis has run its course.
Many new homes are smaller that the gargantuan ones previously built.
Also, builders ahve been giving away homes for years: basically what a home sells for is what it costs to build. The developer makes his money from the land, by pursuing and gaining development rights. Through a process that is largely barred to individuals.
the 25% drop in price has not driven any additional demand at all.
=============================
And it won't as long as people remain out of work. Price is unimportant if you cannot make the payments, just as it was unimportant when credit was easy: as long as you could make the payment, who cared what the price was.
Same thing now, as long as you cannot make the payments, who cares what the price is?
Interesting point about the comparison of gold and houses. how about a graph of gold, houses, oil, and and maybe corn?
I'd settle for a graph showing how much a house cost in gold ...for the last ...say 40 years...
I'd settle for a graph showing how much a house cost in gold ...for the last ...say 40 years...
Try using Google or Bing.
http://blog.bmgbullion.com/wp-content/uploads/11.2.11_US-House-Price-Gold-Ratio.jpg
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