Mortgage rates are historically low; builders have cut the prices of new homes. Yet...
"Fewer people bought new homes in December. The decline made 2011 the worst year for new-homes sales on records dating back nearly half a century."
Washington Post, (1/26)
New home sales haven't been this slow since 1963.
It's tough for builders to compete with lower-priced resale homes. The Associated Press reports (1/26) that "foreclosures...represented 20 percent of all homes sold in the July-September period. Of course, that doesn't count resale homes that are not foreclosures.
On top of the poor sales, housing starts are historically low. Here's an excerpt from the latest Elliott Wave Theorist:
...housing starts have fallen so hard that they are back to the level of 1922. But wait. Three times as many people live in the U.S. today than lived here in 1922. So housing starts per capita are at nineteenth-century levels. You might ask how this happened.
Time and again, small cadres of bankers met with small cadres of Congressmen and made deals that resulted in the formation of the Federal Home Loan Banks (1932), the Federal Deposit Insurance Corporation (1933), Fannie Mae (1938), Ginnie Mae (1968) and Freddie Mac (1970). These government-sponsored companies were designed to make protected lenders rich and generate campaign contributions and highly paid 'consulting' jobs for politicians. How could they sell such blatant self-interest to the voters?
Easy: promise people a free lunch.
That "free lunch" has become very expensive -- costing many "The American Dream." Please take a look at the chart below:
Even so, Marketwatch reports (1/17): "A measure of builder confidence in the market for newly built single-family homes rose in January to the highest point since June 2007..."
Homebuilders are more optimistic mainly because of the improved jobless numbers and rising consumer sentiment.
Even so, massive debt from the housing mania requires more deflating.
Will the wide swaths of vacant homes now visible in Detroit, Cleveland, Las Vegas and Florida become common elsewhere?
Robert Prechter "tells it like it is" in the January Elliott Wave Theorist. He lists 8 results of the housing bubble bursting, and 2 have yet to pass.