Thursday, April 19, 2007

Bursting Back to Back: New Homes

In an effort to gain a better perspective on the new home market, I whipped up a few charts that visually demonstrate the extent of the decline to date.

Since 2007 represents the second year into the down-cycle of residential real estate, I thought it might be helpful to illustrate how far we have come since the end of the up-cycle by charting how the current double digit year-over-year declines to permits, starts and sales are aggregating.

For each of the following charts, the columns show year-over-year changes, on a monthly basis, while the line shows the current month compared to the same month in 2004.

The key here is that year-over-year changes to permits, starts, and sales have remained in high double digits and although it’s too early to say whether the declines will grow even larger in the coming months, the fact that they remain in the high double digits for the second year running is significant.

Remember, we are well into the period where these various measures began to register steep declines last year, so all further year-over-year declines from here on out indicate extensive weakness.

The following charts show “new home permits” nationally, in the northeast and west, “new home starts” nationally and “new home sales” nationally.

Notice that on each chart the line is essentially combining the year-over-year changes seen in 2005 and 2006 and shows virtually every measure trending down precipitously.

Although year-over-year declines to permits, for example, have not accelerated measurably from September 2006, the fact that they continue to decline roughly 30% should provide a solid indication that they are by no means stabilizing.

They are, in fact, trending down rather sharply.

Click on the following charts for larger versions:






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