U.S. New Home Sales in Free Fall; American Housing Market on Verge of Collapse
In the wake of the disastrous existing home sales data for July, reported on in my previous blog comment, the Commerce Department released figures for U.S. new home sales for July. They have declined 12.4% from the prior month. More ominously, these figures, when compared with July 2009, reflect a contraction of nearly one third in new home sales. Remember, July of last year was already experiencing a dismal level of new home purchases.
The July new home sales in the United States came in at the poorest level since 1963, reflecting an annual rate of 276,000 sales. To put this number in context, in 1963 the American population was 190 million versus more than 300 million in 2010.
The combination of record contractions in existing and new home sales in the U.S. is indicative of a housing market that, far from recovering, is on the verge of the next phase of a deep collapse. The earlier collapse stemmed from subprime mortgages that defaulted, crippling the global financial system. The second phase is being driven by high unemployment, with no signs of an early turnaround. In this situation, one must be an obtuse optimist to believe that the banks and investment houses will be immune from the impact of what is clearly an accelerating collapse in the residential real estate market in the United States.