Although the housing bubble exploded about 4 years ago, the housing market is still in the doldrums, and a turnaround is nowhere in sight. For new homes and new home construction this is especially true. This situation is unfortunate for the overall economy since building a new home creates 3 jobs for a 12 month period, and it also generates roughly $90,000 in various taxes.
In fact new home sales have been hit much harder than homes that were previously lived in. The former are down well below 50% of what is considered normal and are on a pace to be the lowest level in the 50 years that the government has been keeping records. The annualized rate of sales for new homes in February, 2011 was only about 250,000 in the U.S., a country with a population of over 300 million. Used home sales are down quite a bit as well, but the figure is only about 10-15% below what is considered normal. Almost 40% of used homes currently being sold are distressed properties. This means they are either foreclosures or short sales.
Why is a recovery in housing taking so long? The reason is that there have been huge numbers of foreclosures, and the list seems to keep on growing longer all the time. More foreclosures are forecasted for 2011 than occurred in 2010 when there were already over a million of them. The most shocking statistic this author has read about real estate lately was one published by the census bureau, which is just now making reports on the 2010 census. It said that 18% of all the homes in Florida are sitting vacant.
Considering that Florida is a populous state with a population of 19,000,000, this means that there are roughly of a million vacant properties in that state alone. In Arizona and Nevada the census figures were 16% and 12% respectively.
The problem for new home sales and construction is that they cannot compete with the low prices being offered for homes that were previously lived in. The difference in price for new vs. old is currently running about 30% on average. A more typical number is about 15%. Surely a new home should sell for a premium over an older one, but a 30% difference is hard for buyers to justify.
Unfortunately the empty and foreclosed levels of housing inventory are likely to stay high for quite a few months, possibly several years. This is because there are many homes which have had foreclosure papers filed but which are not yet on the market for sale. A large amount of these homes will eventually be foreclosed upon after having gone through the entire process, and they will certainly keep the foreclosure numbers high for many more months.
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