Shocking!

I just had to add this on real estate this morning. New home sales are at a record low in May after the government stimulus ended, and this was well below the average 19% drop expected from surveyed economists. The drop was 33% to the lowest level - 300,000 homes - since record keeping began in 1963. Of the 79 economist surveyed by Bloomberg, apparently one got it right predicting 300,000. I would like to know his or her name.

http://noir.bloomberg.com/apps/news?pid=20601087&sid=aFryYpgGDKpY&pos=1

Add to that that April's number was revised down 59,000 and months of supply is now up to 8.5 months and you have a fairly ugly scenario.

http://www.calculatedriskblog.com/2010/06/new-home-sales-collapse-to-record-low.html

Let's not forget that mortgage rates are in record low territory, around 4.7-4.8%, so that should inspire sales. With prices down and mortgage rates low folks should be able to afford to buy. My sense is that most first time buyers who could afford to buy have already done so and there are not many families currently being added to that list as unemployment is high and young couples are strapped. So buyers need to come from those now owning homes, but they cannot buy a new home unless they sell their old one and make enough for the down payment on the new one, which is very difficult these days. Accordingly, we just paid if forward big time on home sales with the tax credit and I would not expect much in this area for months to come. Indeed, since the tax credit expiration, new purchase mortgage applications continued to decline this past week, suggesting the numbers for June will be as ugly as May or uglier.

http://www.calculatedriskblog.com/2010/06/mba-mortgage-purchase-applications_23.html

And commercial real estate, which was showing signs of stabilizing is perhaps not as stable as we thought. Architectural billings, which lead commercial RE construction by several months, are down fairly significantly in May. Once again, ugly.

http://www.calculatedriskblog.com/2010/06/aia-architecture-billings-index.html

Disclosures: None