Housing Market Collapses

In May we saw new home sales collapse by a record 33%, to a low of 300,000 units at an annual rate. This surpasses the previous all-time low of 341,000 set back in April 2009 when the economy was deep in recession. In addition, April was revised down to 446,000 from 504,000 and March to 389,000 from 439,000. The last time we saw new home sales make a new low within a year of a recession was during the double dip of the early 1980s.

As we predicted, all the tax credits did was distort the data and delay the fundamental secular downtrend in residential real estate. Due to excess inventory levels, the median price of a new home fell 1% (month over month) in May to $200,900 and is now down nearly 10% for the year (was $222,600 in December). We have not seen home prices this low since December 2003 and are miles away from the $257,000 peak we had in 2006.