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2.7%  Q1 GDP    4.57%  avg. 30-year mortgage     9.5%  Unemployment

May new home sales plunge 33%, surprising everyone

Forecasters were expecting that May new home sales would decrease compared with April, but not by this much: down 32.7 percent to an annualized sales rate of 300,000, which is a record low, according to numbers out moments ago.

May existing-home sales reported on Tuesday unexpectedly dropped 2.2 percent, while forecasters were predicting a rise from April.

All told, this paints a dismal picture for a hoped-for recovery in the housing sector. It now appears clear that the slight recovery we've seen in recent months has been fully supported by government subsidy -- the home-buyer tax credits extended from the fall through the spring. It expired at the end of April. I believe the technical term for what happened to home sales after the credit expired is "fell off the cliff."

Sales of new homes fell sharply all across the country in May, but most in the West, where they were down 50 percent.

The median price of a new home in May was $200,900, which was down 9.6 percent from May 2009 and the lowest since December 2003.

New home sales were up 14.7 percent in April, compared with March.

New home sales make up a much smaller part of the market than existing-home sales. Nevertheless, today's news likely means that home builders will contract their building.

"Bottom line, we knew there would be a large post-tax-credit drop in sales, but the degree is obviously big," writes Miller Tabak equity strategist Peter Boockvar. "The question though for the industry is not this data but what happens after the hangover runs its course. Either way, the distortion of steroid shots into the marketplace has only made long term planning and thus efficiently allocated capital that much more difficult to coordinate."

By Frank Ahrens  |  June 23, 2010; 10:02 AM ET
Categories:  Data  
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Comments

President Obama handed money to rich people to help them buy a new home.

Posted by: etronsen | June 23, 2010 10:29 AM | Report abuse

No he didn't, moron. Bush's Wall Street puppet masters did that way back in mid 90's and thru 2007 by offering large sales commissions an asset backed, not deposit backed, boutique lending products. They got fat checks, the American people got a crippled mortgage industry, and those of us still in mortgage business got ZORBA.

Blaming this on the current President is as intellectually lazy as possible.

Posted by: reindeerterp | June 23, 2010 10:47 AM | Report abuse

Think of all the Billions Obama threw away in the last year and a half in his socialist attempt to suppport faux levels of Housing Prices......now the prices will collapse to where they SHOULD have been a year and a half ago, if the Democrats would just get out of the way and let the market set the new price.

This also carries over to jobs as he artificially supported federal, state and public union jobs at faux levels the country cannot afford now or in the distant future. When will Obama grow up and start acting like a leader, instead of some liberal-socialist College Poli-Sci Professor.

Posted by: Realist201 | June 23, 2010 10:48 AM | Report abuse

President Obama handed $8,000 to people who wanted to buy first homes, but who might have had annual incomes of up to $225,000.

The plan clearly did nothing to aid the housing industry.

Posted by: etronsen | June 23, 2010 10:50 AM | Report abuse

OK - I know these housing numbers are bad , but this doesn't change the fact that the economy is in recovery, right? I mean things are still getting better, aren't they?

Posted by: ejhickey | June 23, 2010 10:52 AM | Report abuse

President Barack Obama; epic failure.

Posted by: etronsen | June 23, 2010 10:54 AM | Report abuse

Why are you surprised???? Reporters are some of the stupidest MoFos around...always carrying the politician and industry's water....Let the depreesion begin so we can get over this hump ASAP....

Posted by: 4thFloor | June 23, 2010 10:55 AM | Report abuse

It should not be too much of a surprise that the tax credit has had only a limitied impact. But focusing on it as the source of government induced distortions in the housing market is unreasonable. The fundamental reality of the housing market is a long term process of correction from more than a decade of badly failed government policies. Those policies produced by far the most massive excesses in housing prices and bad mortgage debt seen in the last hundred years. Between the loose money policies, the belief that home ownership should be a universal goal, and the idea that people could fund their retirement off a Ponzi scheme of ever rising real estate prices, policies of both Democratic and Republican administrations have destroyed any kind of rational housing market. There is just no way of knowing how long it is going to take for housing prices to settle out at some sustainable level and how long it is going to take for consumers to sort through the consequences to their long term family finances from resolving a bad decision to buy a house for more than it was worth and possibly more than they could afford to pay. Of course, this reality is reinforced by the problems with unemployment. It is also reinforced by Federal Reserve monetary policies that accomplish nothing positive but make it very difficult for anyone to make rational long term financial decisions.

Posted by: dnjake | June 23, 2010 11:02 AM | Report abuse

..."Wow America have the Republicans ruined you but good, losing a record 8.5 Million jobs will do that to you! Leaving a record/debt/bill/deficit of $1.5 TRILLION as the Blew it Bush/Party of "NO" did/Republicans will do that to you! I don't care how good you are as a President no man can replace 8.5 MILLION JOBS in two years "CAN'T BE DONE! This is what you get for voteing Republican!

Be sure now you "RUN/PUT/SOME/MORE/BACK/IN,

......"LOL.......WOw...HAVE THE REPUBLICANS RUINED YOU BUT GOOOOOOOOOOOOD!

...."The Republicans sure do APPRECIATE IT!

Posted by: ztcb41 | June 23, 2010 11:05 AM | Report abuse

The housing market is not Obama's "fault", it's a market correction. Housing prices have been rediculously inflated for years, it's inevitable that the swing the other way is going to be just as dramatic. It's economics 101.

Posted by: Catherine55 | June 23, 2010 11:10 AM | Report abuse

Why is anyone surprised? Bozo is too busy wearing clown shoes and playing golf to be bothered by the economy or the lives of the little people.

Posted by: carlbatey | June 23, 2010 11:10 AM | Report abuse

OK you DONKEYS this isn't Obama's mess. The GOP created this mess and it's a BIG mess, that's why it's hard to clean up.

Posted by: access11 | June 23, 2010 11:11 AM | Report abuse

I wish the real estate market crash would hit the DC area market (especially Fairfax Co)!!!

Houses in the DC area are way overpriced! For example, the I saw a listing for a freaking 2 Br 1 1/2 bath 60 year old house (no garage) for $420K! What a f'ing joke! Sad thing is some moron (or the mortgage lender) will probably pay this. The median home price in NoVa is still close to $600K despite the declining home values in the rest of the country. This is still un-affordable for most first home buyers.

So you are left with three options, a condo, a townhouse, or the commute from hell.

Condos are a joke due to the non tax deductible condo fees and their often poor appreciation rates. BTW, there is currently a glut of condos in the area with more under construction.

A townhouse is a vast improvement over a condo but still not a good as house.

Commuting back and forth from areas outside the DC area where real estate prices are more reasonable is also a non starter. I wonder how those poor wretches sitting in traffic 2-3 hours a day on I95, I270, or I66 feel? Get up a 4:30AM every morning and don't get home until 8:00 PM. Wow! That must be really nice! The long commutes are bad for your health, the environment, and certainly doesn't help reduce the U.S. oil dependence.

I wish the mortgage companies would say to the DC area, No! Where not going to grant mortgages for inflated home prices. If you want to pay the ridiculously over priced DC area home prices with your own money go for it!

To the DC area housing market:

Crash, baby, crash!!!

Posted by: montana123 | June 23, 2010 11:12 AM | Report abuse

This number is ominous insofar and what it represents as a clear negative and stopping point in our lengthy housing crisis. Now we face what can be crippling and potentially damaging results, some of which have the same uncontrollable feature as one has at the race track. Unemployment, gas prices,interest rates, credit card debt, diplomacy and health care going forward will be regrettable extenuating circumstances should they spike as well, possibly in tandem.

Posted by: freelanceman4 | June 23, 2010 11:15 AM | Report abuse

President Obama attempted to continue the failed policies of several administrations by subsidizing the purchase of homes by people making up to $225,000 per year.

Not the change I had hoped for.

The way to quash the fire of a bad policy is not to repeat the bad policy.

Posted by: etronsen | June 23, 2010 11:17 AM | Report abuse

..."Thats what happens when the Republicans lose 8.5 MILLION JOBS as they did under the "Blew it Bush/Admin who then left office leaving a "RECORD/DEBT/BILL/DEFICIT $1.5 TRILLION DOLLARS, AND OFFICE WITH THE "LOWEST JOB APPROVAL RATING THE PEW POLL REPORTED IN THE HISTORY OF THE UNITED STATES PRESIDENT 20 PERCENT!

..."Be sure now yOU/RUN and put some more back in, that's what happens when you vote Republican they sure do appreciate it...

..."Wow America have the Republicans ruined you but goooooooooooooooooood/fact!

Posted by: ztcb41 | June 23, 2010 11:18 AM | Report abuse


Letting Rainbow Coalition intimidate banks into making mortgages for insolvent mortgagees, Barney and Chris, both DemonRATS, started the mortgage mess.

Letting Wall St. package the bad paper into gilt-edged APPEARING paper for sale to the World gets to be hung around ReBOOBlican necks.

Making matters worse, giving HUNDREDS OF BILLIONS OF BORROWED BUCKS to the same banks that perped the FRAUD is FISCAL INSANITY and really ought to be DEATH PENALTY class crime.

MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM

Posted by: wapowacko | June 23, 2010 11:22 AM | Report abuse

Not to worry.

"The Great Bush Depression" is expected to end by 2021, during Jebby Bush's third term as your president.

Posted by: perryneheum | June 23, 2010 11:22 AM | Report abuse

Thanks Obama..........

If ongoing failure and confusion is you ideal for government....vote for a democrat next Fall

If the current democrat controlled situation disgusts you......don't

Posted by: georgedixon | June 23, 2010 11:29 AM | Report abuse

There is a huge over reaction to housing numbers for one or two month's worth of data. I think people need to relax and quit obsessing over every single minute-by-minute economic figure published in newspapers. The housing tax credit clearly created a rush before the deadline and stimulated sales. Now we are experiencing a lull as the housing market returns to normal levels in the months ahead.

We need to exercise common sense here. Part of the problem with our economic recovery is inflated expectations and impatience. We are all going to have to adjust to a slower but sustained economic growth pattern than in the past, not the instant boom, then bust, cycle.

Home prices are down and interest rates are excellent. It's a perfect environment for home sales. It will certainly pick up.

Posted by: citizen4truth1 | June 23, 2010 11:37 AM | Report abuse

Home sales for May were down 33%.

One month is not "minute by minute."

A 33% drop is not a lull, it is a huge drop.

"Lull" equals stasis.

"33% drop" equals precipitous drop.

Trying to prop up the housing market was the extension of the horrible idea that everyone should own their own home.

Several administrations have hitched their carts to increasng home ownership rates, and that is the reason we got into the great recession.

Posted by: etronsen | June 23, 2010 11:53 AM | Report abuse

Is anyone really surprised by the result of the government’s unsustainable attempt to juice the housing market coming to an end? The short-sighted foolishness of borrowing yet more money to prop up banks and the real estate industry on the backs of renters and savers is really troubling.

My company http://www.pathtoasia.com/services/ helps Americans move to Asia for jobs and prosperity. Sign up for a free consultation and trial.

Posted by: zf123 | June 23, 2010 11:57 AM | Report abuse

More confirmation that the Marxist Obama agenda is destruction of the ECONOMY!

2010 Impeach & Prosecute!

Posted by: theaz | June 23, 2010 12:06 PM | Report abuse

Here is a quiz. This is open-book, so you can look at a report recently releaesed by the Congressional Budget Office for answers:

In which year, from 2007 back, for twenty years, was the share of total individual federal income taxes paid by the top income percentile the highest?

Answer: 2005.

Posted by: etronsen | June 23, 2010 1:02 PM | Report abuse

What a surprise? The giveaways stop and so does the buying! The Administration has cooked it's own goose. People have now been conditioned to expect bailouts, buy outs and will now respond only when offered giveaways.

Now we find out that taxes will rise for everyone especially the middle class! Surely you didn't buy that "your taxes won't rise one dime if you make less than $200,000 BS."

Wait till the VAT is thrown in on top of all this.

Posted by: Jimbo77 | June 23, 2010 1:09 PM | Report abuse

In other words, the economy is in shambles. Consumers only spend for big ticket items (houses, cars) when there is enough grease from the feds (tax paying citizens footing the bill).

Yes, hope and change are really working - sic.

Payola I (aka Stimulus II) is an out and out disaster. Funds directed to groups/entities that supported the big O. No lift for the economy. Period.

Payola II (aka possible Stimulus III) is the same. Funds will be directed to states and local governments that have billions in unfunded pension liabilities to, you guessed it, public sector union employees.

This is genuinely priceless if it were not so extremely sad.

Posted by: jhpbriton | June 23, 2010 1:45 PM | Report abuse

Tell me again why the subsidies were handed out ?

Posted by: etronsen | June 23, 2010 2:05 PM | Report abuse

Housing prices in many areas of country, including San Francisco bay area, Washington DC, New York City, Boston, Los Angeles, Boulder, San Diego, etc. are still way too high. Obama and Democrats in Congress demand China allows market forces to determine the value of their currency, but reject the idea of the same deciding housing values in this country.

Posted by: Aprogressiveindependent | June 23, 2010 2:53 PM | Report abuse

Surprised who? Not people with common sense.

Take away free money and this is what happens.

Posted by: cavatellie | June 23, 2010 3:17 PM | Report abuse

For those spouting non-sense, this was created by BOTH sides of the aisle.

From the revoking of Glass-Stegal and also programs like the Community Reinvestment act, along with Frank and Dodd and their horrible welfare programs.

Frank/Dodd though are 2 of the biggest villians here, but so are all the banks, the lenders, the underwriters and even the buyers.

Housing is not an entitlement though many believe it should be.

Posted by: cavatellie | June 23, 2010 3:20 PM | Report abuse

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