New home sales cratered a record 33% in May, to a record low of 300,000 units at an annual rate. This breaks the prior all-time low of 341,000 set back in April 2009 when the economy was knee deep (more like six feet under) in recession.

There must have been a wave of cancellations too because April was revised down to 446,000 from 504,000 and March to 389,000 from 439,000. The only other time when new home sales made a new low 11 months after the end of a recession was during the double dip of the early 1980s – assuming that the pundits are correct on this assessment of when the economy bottomed out.

The inventory backlog, which had taken a dive in April as the tax credits were about to expire, soared from 5.8 months to an 11-month high of 8.5 months. And, this excess supply is exerting more downward pressure on pricing – the median price of a new home fell 1% MoM in May to $200,900 and is now down nearly 10% for the year (was $222,600 in December). Home prices have not been this low since December 2003 and are light years away from the $257,000 peak established in mid-2006.

Despite all the stimulus aimed at the housing market, it took builders a record median 14.2 months to find a buyer for a completed home in May. This sector is broken. People don’t want to buy an asset they see will depreciate in value. And people don’t want to pursue the dream of homeownership if it means taking out a mortgage – the scars from the credit collapse are obviously lingering if not accelerating.

Housing's Upside Down V-Shaped Recovery



Median Months To Sell New Single-Family Homes