New home sales extended their 33 months decline, which has now totaled 62.1%. Moreover, despite this month’s increase, there is little indication that home sales are approaching a bottom. Inventories of unsold homes remain very high despite slipping for the thirteenth consecutive month. Prices [in the new-home data] posted an unusual gain but this was due to a shift in the composition of sales toward more expensive areas rather than stability in prices. Home prices are still falling on trend. –Steven A. Wood, Insight Economics
Inventory of existing homes is still very close to its record high so prices will continues to fall rapidly. Since its May 06 peak the Case-Shiller index is now down 15.7%; we expect the peak-to-trough drop to reach 25-to-30%. –Ian Shepherdson, High Frequency Economics
Despite the sharp drop in home prices, housing demand has remained depressed, leaving a huge overhang of homes on the market for sale. In addition, rising foreclosures puts downward pressure on home prices since foreclosed homes typically sell at a discount to the market clearing price. As such, we expect home prices to fall another 10% through the end of 2009 as the market slowly, and painfully, clears the hefty overhang of homes on the market for sale. –Michelle Meyer, Lehman Brothers
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