Is Housing About to Crater?

The US Department of Housing and the US Census Bureau reported today that sales of new houses tumbled by 21.2% from a year ago. That's one of the steepest declines on record. Of course, part of it is because of the media attention given to the credit crunch and related problems. That would have scared even the hardiest buyers away.

The data also shows that the median sales prices declined by 7.5% to $225,700, one of the largest drops in several decades.

Now, it's important to remember that this is data for New homes. Sales and prices of existing homes haven't fared that well either. Sales of existing homes fell 4.3% to a seasonally adjuted five year low. Prices on existing homes though were flat.

So what does this mean? I'm not really sure. It's clear the homebuilders are getting clobbered as their rows of new homes are sitting empty. What I want to see is the inventory number for existing homes on the market. I'm wondering if sellers are pulling their homes off the market. In tough times, many homeowners decide to sit tight and wait for better days. That in itself will reduce sales. If so, maybe things aren't so bad in the existing home sales market. After all, sales are tumbling but prices aren't.

It does seem clear though that we have some pain to go through until homeprices adjust to more rational levels, at least in some parts of the country. Here in Boston, prices have barely come down and homes are still selling, despite the fact that prices are amongst the highest in the country. It all really seems to depend on where you are.