Bloomberg is reporting
New Home Sales Fall; Unsold Homes at Record

U.S. new home sales in November fell by the most in 11 years as rising mortgage rates and elevated prices discouraged some buyers, leaving a record number of homes on the market.

Purchases fell 11.3 percent to a 1.245 million annual rate from October’s revised 1.404 million pace, which was a record, the Commerce Department said today in Washington. The median price of a new home rose last month to $225,200 from $224,500 a year earlier.

“The housing market is definitely cooling,” said Richard Yamarone, chief economist at Argus Research Corp. in New York. This suggests that the October record was the result of last minute purchasers in a rising mortgage rate environment.”

U.S. mortgage lenders will trim 10 percent to 15 percent of their record 535,000 employees next year, said Orawin Velz, director of forecasting at the Mortgage Bankers Association. “We’re expecting a decline in employment because we expect the volume of originations to decline pretty significantly next year — 20 percent,” he said.

Since 2001, the housing market accounted for 50 percent of U.S. economic growth and more than half of private payroll jobs creation, according to a report in August by Merrill Lynch & Co., the world’s largest securities firm.

Hmmm 15% of 535,000 Mortgage Lending jobs is a mere 80,250 jobs lost. That is just mortgage lending. What about plumbers, roofers, appliance manufacturers, etc etc etc?

Bruce Karatz, chief executive officer of KB Home, said speculators began leaving the housing market six months ago. The Los Angeles-based company is the fifth-largest U.S. homebuilder by stock market value.

KB Home’s $7 billion backlog is 40 percent higher than it was a year ago, Karatz said in an interview last week. He expects the largest home building companies to gain market share in a more competitive environment and attributes this month’s decline in homebuilder confidence — a 32-month-low — to worried smaller companies.

“I don’t see any drop in confidence” among the largest homebuilders, Karatz said. “There may be some concern among smaller companies that the big builders can make their lives a little tougher in a softening sales environment, and they may be right.”

Every housing cycle is the same. There will not be a drop in confidence until some of the players go bust.

Here is my favorite clip from the article:

“The end of the housing boom doesn’t mean the end of house appreciation,” Ara Hovnanian, chief executive of home builder Hovnanian Enterprises Inc. in Red Bank, New Jersey, said in a Dec. 16 interview. “Instead of going up 20 percent a year, values are more likely to increase by 3 percent to 5 percent, which is normal and healthy. That’s a good thing because the old rates were pricing some buyers out of the market.”

Let’s see if I have this right

  1. People were priced out of homes because they were going up 20% a year
  2. But houses will be more affordable if they keep going up by another 3-5% a year

With totally twisted logic like that, it’s no wonder the builders are still confident.

Mike Shedlock / Mish/