Business-Insider

by S. Wade Hansen

The New Home Sales numbers for December were released today, and the numbers were grim across the board. Here's the lead paragraph from the release from HUD and the U.S. Census Bureau (emphasis added):

"Sales of new one-family houses in December 2007 were at a seasonally adjusted annual rate of 604,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.7 percent (±12.1%)* below the revised November rate of 634,000 and is 40.7 percent (±7.8%) below the December 2006 estimate of 1,019,000."

Yikes! That is the worst sales year since 1963---and there were some pretty bad years in the 1980s.

However, the number that struck me the hardest was 9.6. That is how many months it will take to clear the current inventory at current sales rates. Yep, it will take 9.6 months to clear current inventory...not to mention the flood of homes that are going to come onto the market as the number of foreclosures continues to escalate.

9.6 tells me that we have got a long way to go before we come out of this recession here in the U.S., and the USD is not going to fare well during that time.

Here's a little exercise to illustrate why we haven't reached the bottom of the housing pullback or the economic slump we're in. Ask yourself what you would do if you had to move for work and you were looking at the prospect of holding onto your old house for 9.6 months while you were paying for a new house or renting in the city you move to. Would you stay the course and keep paying both payments, or would you cut your asking price and throw in some bonuses to sell your house?

Home prices aren't done falling. Home equity loans are drying up. The middle class has less to spend. Any economic stimulus package is going to take months to reach the American middle class. The USD is going stay behind the woodshed a little longer yet.

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