Wednesday, June 27, 2007

New Home Sales dipped in May

A report issued by the U.S. Census Bureau and the Department of Housing and Urban Development demonstrated that sales of new single-family homes declined 1.6% month-over-month in May. Given the record jump in sales in April, this decline is no big news and hardly indicative of market trends. Sales of new homes have fallen in every month except for April, erasing hopes for a rebound in housing. Interestingly, the margin of error for new-home sales is 10.8%, essentially higher than monthly fluctuations, which means that most of these numbers could turn out to be very, very inaccurate. The median price dropped to $223, 700, down 2.1% from last year.

Freddie Mac’s Treasurer Timothy Bitsberger said the housing slump is “contained”, which is probably the equivalent of “all is well”. The Real Estate market, however, is already threatening the economy at large, after two Bear Sterns hedge funds that had invested in mortgages collapsed. This may or may not cause a revaluation of similar structures and whole classes of securities, but already indicates trouble among large Wall Street investors. The housing slump is more severe than what the public is led to believe, and covering up problems is getting harder and harder.

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