Today, the U.S. Census Department released its monthly “New Residential Home Sales” report for September causing a new round of optimism in the traditional business media.It was speculated that the reports results, showing a 5.3% increase in new home sales as compared to Augusts revised number, might be a further indication that the recent, widely publicized, perspective suggesting that the nations housing market is setting a bottom may, in fact, be accurate.
This news comes only minutes after former Federal Reserve Chief Alan Greenspan stated that he sees "early signs of stabilization" in the nations housing market with a "flattening" of sales.
This sentiment builds on a statement made earlier this month when Greenspan suggested that for housing “the worst may well be over” citing some perceived stabilization of weekly mortgage applications.
It seems Greensspan’s encouraging outlook set a tone for October, a month in which many in the real estate industry felt confident enough to not only embrace the notion that the housing market had bottomed but to reiterate it at every opportunity.
Hopefully for them though, Greenspan’s viewpoint is more accurate today than it was back in 2004 when he advised consumers to switch over to ARM loans:
"Recent research within the Federal Reserve suggests that many homeowners might have saved tens of thousands of dollars had they held adjustable-rate mortgages rather than fixed-rate mortgages during the past decade, though this would not have been the case, of course, had interest rates trended sharply upward."
Lenders, being encouraged by the Feds position then, offered many new loan products helping home-owners draw out equity in record numbers as well as home-buyers reach for every available dollar.
Is it possible that the “Maestros” outlook and advice may have finally run its course?
Are there grounds to suggest that Greenspan could possibly be suffering from a serious case of wishful thinking, motivated in part from the obvious loss of credibility that would surly ensue should the nations housing market really revert to the mean?
Remember, not only was it during Greenspan’s tenure that the nations housing market ran wildly out of control, but he left his position without doing much about it other than paying a little lip service to “frothy” markets and “exotic” lending.
Additionally, it seems that Greenspan has been attempting to distance himself from culpability of the housing bubble as his statements suggest during a recent speech:
“I don't think that the (housing) boom came from a 1 per cent Fed funds rate or from the Fed's easing. It came from the collapse of the Berlin Wall,"
In any event, the current edition of the New Home Sales report looks absolutely abysmal.
Among other things, the report showed the greatest drop to new home prices in over 35 years as the median price for a new home declined 9.7% as compared to September of 2005.
Look at the following summary of today’s report:
National
- The median price for a new home was down 9.7% as compared to September 2005.
- New home sales were down 14.2% as compared to September 2005.
- The inventory of new homes for sale increased 14.4% as compared to September 2005.
- The number of months supply of the new homes has increased 33.3% as compared to September 2005.
Regional
- In the Northeast, new home sales were down 6.6% as compared to September 2005.
- In the West, new home sales were down 13.6% as compared to September 2005.
- In the South, new home sales were down 7.9% as compared to September 2005.
- In the Midwest, new home sales were down 36.6% as compared to September 2005.
