Yesterday, I chatted with a realtor I know who is doing well and still selling homes, which is not easy in this market. She pointed out that there are incredible bargains as homes are getting marked down. To make the bargains even more palatable, long-term financing rates are very cheap. Yet, home buyers are staying away in droves. Why? Economic uncertainty, rising unemployment, falling home prices and the threat of deflation.
As a homeowner, I don’t like the fall in home prices any more than the next person. However, as a financial advisor, I have to face the facts. Check out these charts from Calculated Risk and Bespoke:
New Home Sales Plunge
Source: Bespoke Investment Group
New Home Supply Still Very High
Source: Calculated Risk
New homes are not selling in large numbers and despite the decline in housing starts, the inventory of unsold homes is high.
Of late, there has been a huge gap between sales of existing homes and new homes. It appears that the gap may close a bit, but only because existing home sales are now falling.
New Home Sales Compared to Existing Home Sales
Source: Calculated Risk
At some point, this bear market for real estate will end. They always do. And, those who have the patience and the cash to snap up bargains will be happy. In the meantime though, it’s tough.
Of course, if you thought it was tough for home owners, check out the poor home builders. Their shares are tanking:
Home Builders Stocks Plummet
Source: Bespoke Investment Group
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Kurt Brouwer is a fee-only financial advisor with three decades of experience. He is the chairman and co-founder of Brouwer & Janachowski, LLC. Kurt has written books, articles and hundreds of blog posts on mutual funds, ETFs and other investment topics. E-mail: kurt.brouwer *at* gmail.com.
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