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  • Leonard Brecken

New Home Sales Weaken Further.

Digging deeper into the New Home sales data released today reveals troubling signs not only as units decline, but more troubling prices & more important supply which now appears on a uptrend for the first time. This indicates that for the first time in the cycle the realtor community can no longer claim that limited supply is to blame for the the decline in demand since it is now rising and rising fast.

Folks the Housing Correction is REAL and happening real-time. I want to point out that use see how all three lines were closely correlated in past. The red line depicting Pending Home sales is well below the real-time data on new & existing homes indicating both must fall more to catch up to the leading indicator in red. This is true even if the market overall ceases to weaken further.

Source: Bloomberg, Zerohedge

More troubling is the year over year comparisons of New Home Sales which declined over 13%

Source: Bloomberg, Zerohedge

Further, not only units falling but now prices which for the most part have been rising at unsustainable rates 2X wages thus our prior warnings that affordability was HUGE issue as rates rose. More importantly look how far prices need to fall to correlate to unit prices...the gap in the charts below clearly show price vs unit relationship no where near historical levels.

Source: Bloomberg, Zerohedge

Finally, as you can see in September inventory rose to the highest level since 2011 to over 7 months after remaining in a range of 4-6 months for most of the cycle.

Source: Bloomberg, Zerohedge

After 12-18 months of warnings the housing down turn is upon us. As business owners its now critical to focus marketing & sales on areas less sensitive to the economy & rates such as remodeling, seek ways to reduce costs & overhead (fixed costs), reduce cash cycles and to scrutinize growth plans to name a few. Contact us at THEPROFITCONSULTANT.ME or on how we have been preparing businesses for this downturn for the past year to better prepare them financially.

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