Big numbers coming in from the real estate industry:
Sales of newly built homes shot up 27 percent in March — the largest monthly gain in nearly five decades — as mild weather and a lucrative tax credit pumped up demand for homes in all four regions of the country, according to federal data released Friday.
The Commerce Department reported that new-home sales jumped to a seasonally adjusted annual rate of 411,000, reversing February’s record low and far exceeding the expectations of many experts who track the industry.
“We needed a grand slam . . . and we got it,” Patrick Newport, an economist at IHS Global Insight, wrote in a note to clients.
Economists disagree on whether the sales momentum can be sustained, especially after the tax credit expires. But many economists say that some buyers who were deterred by the storms that gripped parts of the country in February clearly were rushing to beat the tax credit deadline.
The numbers look great, and we’d love to say this is a recovery, but the real estate market is just waiting to be absolutely destroyed yet again. Charles Sizemore of HS Dent Investments doesn’t think there is a recovery on the horizon:
In January, we wrote that this would happen (see “Housing Sales Slow With Expiration of Tax Credit“), and the reasons shouldn’t be particularly surprising. The $8,000 first-time homebuyer tax credit expires at the end of April, and there is a widespread belief that mortgage rates will be rising soon. So, we fully expected to see a mad dash to buy a house in March and April, and that is exactly what we are seeing now.
But don’t get too excited here; the abnormally high surge in sales this spring are pulling forward sales that would have normally happened over the peak summer months or at some indeterminate point in the future.  This is not the start of a new trend, and we would expect sales to plummet over the next few months.
Let us be clear: we DO expect a rebound in the starter home market due to favorable demographic trends. There has been very little in the way of new construction for several years now, and the first of the Echo Boomers are starting to inch into their homebuying years. So we WILL see improvements in the starter home market — eventually.  But for the time being, we expect much more weakness in virtually all market segments.
For those just joining SHTF Plan, we direct your attention to the next wave of the collapse, starting right now and lasting through about the middle of 2012. As interest rates on homes start to reset, and those folks who were paying those 1% teaser rates, they are about to see their monthly mortgage payment jump to the moon. If you’re already strapped, and your payment jumps from $1200 a month to $1650 a month on a 2% upward adjustment in your interest rate, you’re toast (Visualize Wave Two). And it won’t stop there, as most variable rate mortgages allow for adjustments every 6 to 12 months, so your rate could adjust upwards up to somewhere around 6% (depending on your loan) over just a year or two. This is going to affect millions of Americans.
Also, don’t forget about the millions of homes that are either in delinquency (haven’t paid their mortgage for over 60 days) or are sitting in the foreclosure shadow inventory. We don’t really know what these numbers are, but some estimates have them at 7 million or more.
Once the tax credits disappear, the stimulus ends, and these foreclosed homes start getting marked appropriately on bank books, it’s all coming down – heck, it might come down before that. Expect real estate values to be destroyed. What’s really going to hurt the real estate market, is that even though prices might fall 20% or more from here, mortgage rates are going up because of all the money printing and debt being created by Washington. This may make it twice as hard for housing to recover. Back in the early 80’s mortgage rates were over 10% – hard to believe, but it can certainly happen again.
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Let the SHTF.Â
May it hit the Hope and Changers with a vengeance. When it does lets hope they have to breathe polluted air, drink fouled water, live in mud huts, and eat tree bark.Â
Oh the 80’s, the good old days. Had an adjustable mortgage at 16%, thought it had to adjust down. Went up to 18%. Of course the house in the country only cost $35k and my mortgage was only $25k, glad I don’t have to play the game today. Doesn’t look good.
I have talked to several coworkers who are buying or have relatives buying a house because of this $8000 tax credit/rebate deal.
I live in Greenville SC(Located off interstate 85 between Atlanta GA. and Charlotte NC.) and we have several dozen housing developments that were slated for 100+ homes, but only 1/3 were ever built and a high % of those are in various stages of construction,now abandoned ie: in the dry but no siding, only half the shingles on the roof…and these are right next to occupied homes…how would you like to be that guy!, what if he gets transfered in his job and needs to sell this house…who is gonna buy a house like that, knowing in the back of their mind that they(the contractor) will never finish that house next door?
At one site, the original sign said “luxury homes from the low 400’sâ€â€¦now the new sign they just put up says “homes from the low 200’sâ€
hell the madness I see in all this, is at several of the above sites with abandoned houses there are Idiots starting new “developments†within 1/4 mile down the road.
Humans…Too stupid for our on good!
Correct me if i am wrong, but if federal reserve decide to raise the interest rates, that would contract the money supply, then that would destroy lending and that means your mortgage will kill you.
Is that a correct assumption? The sucker punches just keeps on coming.
Real Estate is dead, with the exception of get-away properties in small towns with a little land and good water away from the maddening crowds. A new paradiam is about to manifest that will make the green shoots shrivel overnight.
Events will overtake the economy. 524 402 925 TCA
zukadu or Mac,
What is the significance of 524 402 925 TCA? What does this mean?
Hedge, I am not sure — We’ll have to wait for Zuk on this one.
Mac,
The 524 references May 24th I believe. I read a earlier Zuk message on this site alluding to this date as some kind of omen. Now if Zuk will fill us in on the rest of the alpha numeric code we can finish the interpretation and make preparation(s) as needed???     Â
I thought it might be an IP address but nothing come up. As for the housing market, this will be one of the biggest numbers you will see for the next few years. Water front property in florida is at prices not seen in more the 20 years. One of my clients just got a 2400 square foot home on 1.3 acres St Johns River front with 2 docks and 3 boat lifts for $205K, another just paid $150K for water front on a a salt water canal at the beach. The current home give aways are destroying wealth all over America and putting more people underwater. Trust me its not hard to sell a million dollar home for $205K. Someone lost their wealth, now anyone within about 15 miles lost theirs too, if they are trying to sell. The recession is getting wider and deeper. Until they stop the free fall of housing and jobs, there can be no recovery.
Patriot,
Sounds like a heck of deal for sure.. but…will property taxes be assessed at the actual property value of 1M?  Or the sales price value of 205K?   I just want to make sure I understand the bigger picture.   (My thinking is that if I can pick up a fishing shack with a tax appraisal value of 100-200K for a sales price of 20-40K, I’m all for it.)   Appreciate your follow-up comments.
Mac:Â Â 524 402 925 TCA is the embedded secret code for my sleeper cells! 🙂
Seriously, it is a puzzle, for people who like mysteries, the code for the “trigger” that indicates when, where, and how the SWHTF and take the United States deeper into debt and recession. Markets are due for a correction, but if the “trigger” occurs as I believe, markets will crash: the least of our worries then.
More clues in coming weeks! 🙂
Taxes in Florida are reset to the purchase price. I’m sure they are looking to change that. In NC they just raised everyones taxes to the sky. The property taxes on one property I know went from a tax basis $190k to $822K and she is a widow on a fixed income. How is she going to come up with 3 times her current taxes which are in the $2400 range before the new value. If the banks can’t foreclose, then the government will.
Wooo! Hooo! Celebration time!
Last month we sold 15 houses. This month: 20
27% increase of piss poor is 27% less piss poor.
ZZZzzz…
I must gloat a bit. My taxes are low anyway. Here in Indiana I own a 1500 sq/ft house on 30 acres. I’ve lived there for almost 20 years. My taxes have been up to $1000 per year and down to less than $500 per year. This year, however, after being at their highest level, they are $665. When you think about it, it ain’t much. They came down almost 40%. Not sure why but I sure do like it. Now I’m only paying $55 a month rent. Once I get it paid of, I’ll get rid of that by switching to sovereign status. Taxes are for slaves.
Zuk, if I said “Douglas County” or “Omaha, Nebraska” , would that in anyway put me in the vicinity of 524 402 925 TCA?