New Home Sales at Record Low

We expected the news to be bad, but this is really bad.

New homes were at a record low in May as buyers fled the market following expiration of the tax credit, down 33 percent from April (which itself was revised downward.)

This is why anyone with any sense (including me!) argued against the extension after it expired last time. We moved demand forward, artificially inflated prices and set ourselves up for another dip in home prices. Couple these declining sales with the rise in inventory as more sellers flood the market, and it's going to be ugly, probably for the rest of the year.

Once again it just points to the trouble builders are going to be facing, and that's going to trickle down to remodelers as well. Typically, the housing sector leads us out of a recession. That's clearly not going to happen here, which could be very bad news for all of us.

This week we pay the home sales piper

We're going to get our first indication on Wednesday just how big the crash is going to be following the expiration of the new home buyer tax credit. That's the day new home sales for May come out. May's the first month the credit won't have been a factor.

If early indications are any clue, it's going to be ugly. Everything I've been reading and hearing from people out there is that sales are down 20 to 50 percent depending on your market. We'll see how the national numbers come out.

Don't let Tuesday's numbers on existing home sales fool you. Those should still be good because existing sales are reported when the deal is closed, while new sales are reported when the contract is signed. With the recent move to extend the time for buyers to close on deals and get the tax credit, it could be months of those sales trickling in.

EPA Delays Lead-Paint Rule Enforcement

Great news from the EPA today, via NARI.

The agency has agreed to delay enforcement of the LRRP rule until October 1, 2010, citing the need for more time for firms to get trained and certified.

Click here to read the EPA's letter announcing the delay.

More news coming next week on Professional Remodeler

Hopefully, we should know more about the future of Professional Remodeler by next Tuesday.

As I've written before, a lot to be figured out with structure of the new construction group, who's going to be involved, what it's all going to look like.

Word from on high is we should know how the business is going to be structured next week. That's what will allow us to move forward on everything else.

I'll keep you posted!

Inventory growth outpaces home sales surge

So the good news is existing home sales were up 7.6 percent for April -- no surprise. That was the last month home buyers could take advantage of the tax credit.

Unfortunately, more sellers than usual tried to get in on the game, too, with inventories surging 11.5 percent from March to an 8.4 month supply (up 2.7 percent from a year ago.) And with the impending crash in sales in wake of the credit's expiration, it could get ugly this summer.

We'll get our first official look when new home sales come out for May. Existing home sales will take longer to reflect the decline, because they are reported at closing, while new sales are reported at contract signing. That means home sales should remain inflated through June, although we're already hearing anecdotally about the immediate impact this is having on sales, with builders cutting prices to try to bring people in the door.

It's the reason I was against renewing the tax credit last time -- it's a temporary fix that simply moves demand forward and we're all going to pay for it now. (I'd link to one of my many rants against it, but HousingZone has been wiped from the face of the earth.)

Energy efficient remodeling PACE program may be dead on arrival

The White House's effort to encourage energy efficient remodeling through the Property Assessed Clean Energy (PACE) program may not be getting far, with Fannie Mae and Freddie Mac expressing their opposition.

PACE would help homeowners make the improvements by allowing them to borrow money from local municipalities, then repay the cities, which would fund the program through the sale of municipal bonds. The problem mortgage lenders have with the deal is that those liens would become senior.

The Wall Street Journal's Development Blog has more details:

In somewhat-cryptic letters that Fannie and Freddie sent to lenders earlier this month, the companies reminded banks that their agreements don’t allow them to purchase loans that have a senior lien. “An energy-related lien may not be senior to any Mortgage delivered to Freddie Mac,” the company said. Both firms said they would provide “additional guidance” if the PACE programs move beyond the “experimental stage.”

The letters suggest that Fannie and Freddie won’t allow borrowers with a PACE lien to refinance or sell their properties unless the liens are paid off. Proponents say the liens need to be senior or they won’t attract sufficient interest from bond investors. The Department of Energy, meanwhile, issued revised guidelines for municipalities that use the program.

This makes perfect sense. With all the foreclosures these days, why would any lender want to accept this deal? Unfortunately, this will probably end up shooting any chance of a large-scale program of energy-efficient loans.

It's official - Professional Remodeler to relaunch

Still a few details to be worked out, but we're set to restart the magazines under the ownership of MB Media.

The plan right now calls for a July relaunch of the websites, followed by Aug/Sept print issues.