Many economists awaited the new home sales data, released 30 minutes ago. It didn't look pretty. Here's Joe Richter from Bloomberg:
Sept. 27 (Bloomberg) -- Sales of new homes in the U.S. dropped more than forecast in August and prices plunged by the most since 1970, pointing to a worsening housing recession that spells more cutbacks in construction.
Purchases declined 8.3 percent to an annual pace of 795,000, the lowest level in more than seven years, from a revised 867,000 rate in July, the Commerce Department said today in Washington. The median price dropped 7.5 percent from August 2006.
Let's find the silver lining in this report: The median price dropped 7.5 percent from August 2006.
Why would I refer to that as the silver lining? The builders are FINALLY realizing that price is to motivation of the buyer. Incentives were offered by home builders as a way to protect their prices in a falling market. Vegas trips, new cars, and decorating credits just weren't getting the job done. Stubborn home builders are finally pricing their inventory to sell.
Existing home sellers should take notice of this. This will create downward pressure on prices.
