realestate
Real Estate

New Home Sales Down 33%

Wed Jun 23, 2010 7:15 am
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Comments: 0 Views: 206

It has just been reported on CNBC that new home sales dropped more than expected in May, some 33% month over month. This writer has been consistent over the past two plus years that Real Estate in the United States is and has been very weak.

It is inconceivable to me how so called expert Real Estate Analysts can predict that Real Estate is not what it is terrible. Real Estate Analysts have continually been interviewed by CNBC hosts Mark Haines and Erin Burnett hypeing Real Estate, that it would recover in a "V" shape. Nothing could be farther from the truth.

Real Estate as we have known it over the past 40-60 years is fundamentally changed. There is no longer a "World War ll" generation buying homes with "VA" mortgages and there is no longer a "Baby Boomer" generation buying homes on cheap credit with almost nothing as a down payment.

New home builders will see the "folly" of thinking that they will be building millions of single family homes. Yes, housing will be necessary for increased population. However, housing will take on a significant new look. The future will have multi-family residences and cluster style building on smaller plots of land.

Look for home builders like Pulte, Hovnanian, Toll Brothers etc. to merge or go bankrupt. Yes, the change will be dramatic but the economic and cultural changes that have been and will continue to occur will mandate change in how americans live in the 21st century.

This is not to say that there will no longer be single family homes being lived in and being constructed. it is simply that it will no longer happen in "subdivision" style several hundred single family homes on a huge tract of land.

Moreover, my sense is that in the next 10 to 25 years the Markets will recover and values of homes will stabilize, but not without "Much Pain" in the next several years!

Mortgage rates may yet go down in the near term with little affect on home sales. The paradox is that when Real Estate does recover mortgage interest rates will be higher due to the changes coming in the Bond Market!



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