New home sales in USA plunge 33%

Alan Zibel, AP Real Estate Writer, On Wednesday June 23, 2010, 10:37 am EDT

WASHINGTON (AP) -- Sales of new homes collapsed in May, sinking 33 percent to the lowest level on record as potential buyers stopped shopping for homes once they could no longer receive government tax credits.

The bleak report from the Commerce Department is the first sign of how the end of federal tax credits could weigh on the nation's housing market.

The credits expired April 30. That's when a new-home buyer would have had to sign a contract to qualify.

"We fear that the appetite to buy a home has disappeared alongside the tax credit," Paul Dales, U.S. economist with Capital Economics," wrote in a note. "After all, unemployment remains high, job security is low and credit conditions are tight."

New-home sales in May fell from April to a seasonally adjusted annual sales pace of 300,000, the government said Wednesday. That was the slowest sales pace on records dating back to 1963. And it's the largest monthly drop on record. Sales have now sunk 78 percent from their peak in July 2005.

Analysts were startled by the depth of the sales drop.

"We all knew there would be a housing hangover from the expiration of the tax credit," wrote Mike Larson, real estate and interest rate analyst at Weiss Research. "But this decline takes your breath away."

Economists surveyed by Thomson Reuters had expected a May sales pace of 410,000. April's sales pace was revised downward to 446,000.

The government offered an $8,000 credit for first-time buyers. Current homeowners who buy and move into another property could receive up to $6,500.

New-home sales fell nationwide from April's levels. They dropped 53 percent from a month earlier in the West and 33 percent in the Northeast. Sales in the South dropped 25 percent. The Midwest posted a 24 percent decline.

Builders have sharply scaled back construction in the face of a severe housing market bust. The number of new homes up for sale in March fell 0.5 percent to 213,000, the lowest level in nearly 40 years. But due to the sluggish sales pace in May, it would still take 8.5 months to exhaust that supply, above a healthy level of about six months.

The median sales price in May was $200,900. That was down 9.6 percent from a year earlier and down 1 percent from April.

New-homes sales made up about 7 percent of the housing market last year. That's down from about 15 percent before the bust.

The drop in new-home sales means fewer jobs in the construction industry, which normally powers economic recoveries but has remained lackluster this time.

Each new home built creates, on average, the equivalent of three jobs for a year and generates about $90,000 in taxes paid to local and federal authorities, according to the National Association of Home Builders. The impact is felt across multiple industries, from makers of faucets and dishwashers to lumber yards.

In USA, 500 people arrested for mortgage fraud

Nearly 500 people have been arrested in a U.S.-wide crackdown on mortgage fraud since the operation began March 1. Federal officials found that Las Vegas was one of the major centres where scams were situated to falsley inflate house prices.

"I heard this many times," said Scott Hunter, a Las Vegas FBI agent who has interviewed hundreds of people lured into buying homes by crooked real estate agents, brokers and loan officers, to the Associated Press. "They said, 'Don't let your good credit go to waste. You can purchase these properties. This is how you acquire wealth.'

And when the party stopped and they were not able to keep inflating the prices on these houses, the whole thing collapsed."

Daniel Bogden, Nevada's U.S. attorney, said 123 defendants were charged, convicted or sentence within his state since the crackdown, named Operation Stolen Dreams, began. According to AP, Bogden estimated the losses in Nevada at almost $250 million.

Canadian household net worth hits $6 trillion!

Canadian household net worth hit $6 trillion in the first quarter of 2010. It increased by 1.3 per cent, and is the fourth consecutive quarterly improvement in household net worth. This means 96 per cent of net worth lost during the economic crash has been recovered, according to David Onyett-Jeffries, economist with RBC Economics, as reported on Muddy York's Toronto Real Estate blog.

Other numbers from RBC show a strong Canadian housing market. Non-financial assets, where real estate contributes 85.5 per cent, is up 0.8 per cent to $24.9 billion from the previous quarter.

Mortgage debt increased by $16.4 billion in the first quarter, signalling continued growth in the real estate market. Over all, household liabilities rose by 1.5 per cent to $1.4 trillion.

Money Top Source of Stress for North American Couples

Money Top Source of Stress for North American Couples, Survey Finds 

Partners go to extremes to avoid fighting about finances 

American Express 6/16/2010 

What do American couples fight about most? It's not so much about the kids, the in-laws or who's in charge of the remote. It's about how they handle their finances. That was the finding of the May/June American Express Spending & Saving Tracker, which surveyed consumers about the role finances play in their personal relationships. The research sample totaled 2,008 adults, broken down into two categories: the affluent (defined as having a household income of $100,000 and up) and young professionals (those under 30, college educated, $50,000 in income). Finances triggered the most relationship angst (30 percent of respondents), followed distantly by intimacy (11 percent), children (9 percent) and in-laws (4 percent). Money is such a sensitive subject that the vast majority (91 percent) of couples find reasons not to talk about it. The survey unearthed plenty of other nuggets about couples and money:   Avoiding conversations about money is so common that couples are more likely to know their partner's weight than their salary.     Subterfuge: Whether it's guilt or fear of triggering a fight, 27 percent of respondents have lied about what they paid for something, and 30 percent have hidden purchases from a disapproving partner. Avoidance: “Conversations about finances seem to be avoided like the plague by most couples,” said Pamela Codispoti, American Express senior vice president and general manager, Consumer Card Products. Only 43 percent of the general population remember discussing money before getting married. (Among young professionals that number jumps to 81 percent.) Twelve percent of the general population says they’ve never talked about money with their spouse. The other one is worse: Forty percent believe their partner spends more money than they do. The same number (40 percent) consider themselves more diligent than their partner when it comes to saving money and budgeting. My money, not our money. Young professionals are more likely to maintain individual checking, savings and retirement accounts than older generations. Debt? What debt? One-third (31 percent) of respondents do not know how much debt they carry as a couple.       Share and share alike—or proportionally alike. Most couples (66 percent) share all monthly expenses, while the remaining 34 percent divide their bills each month, with methods ranging from paying certain bills individually (as in, I'll pay gas and electric if you pay cable) to splitting household expenses based on income ratio. Rules for big-ticket spending: Most Americans set a dollar threshold for major purchases. Anything above that amount, and the buyer is expected to consult with their partner before buying something. The average threshold: $275 ($395 for affluents). Regrets: More than half (56 percent) of couples feel they have made a financial mistake in their relationship, ranging from spending too much on their wedding to buying a house at the top of the market. Exactly half (50 percent) say they would do something differently to manage their financial situation if they could go back in time, including putting more into savings and investments, spending more responsibly (27 percent) and discussing financial goals and expectations earlier (17 percent). Strife: Discussions about household finances lead to arguments among 45 percent of the general population. The rich don't fight more than the average couple; but the young do; 72 percent of young professionals argue over money versus 44 percent of affluents. Admissions on Facebook When American Express fans were asked on Facebook if they ever hid an expensive purchase from their partner, nearly 100 people came out to confess that yes, they had. Ramon Perez described passing a $3,000 triathlon bike off as "a $89.99 K-Mart Special," while Kathleen Banko Freihofer explained how she gets away with it: "Yup!! Just take off the tags and hang it in the closet like it's always been there...guilty." Others, like Chris Whatshappening cautioned against spending deception, "Lying to your spouse is a slippery slope (yes, even with larger than normal purchases). I've done it a few times, and the short and long-term consequences of lying have always been far worse than simply telling her what I am doing."