Who buys these New Homes? | Forex Factory

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Who buys these New Homes?

  • #1
  • First Post: Edited 12:57pm Dec 29, 2006 11:11am | Edited 12:57pm
I know there are brilliant minds here at ForexFactory, I am obviously not one of them. I am very puzzled about New Home Sales. If you look back over the whole year there were about 13million or so new home sales... my question is: Who buys these homes? Last year there were even more new home sales than this year... so over the past two years there have been what... 30 million new homes saled? Existing home sales makes sense, people move all the time.

Please explain the numbers to me and how it makes sense to you. Anyone can leave a response, I would like weird theories as well.

Corporations foreign or domestic purchasing new homes?
Individuals (Gates, Buffet etc) buying massive numbers as investments?

I just dont understand, given population growth and other factors.... how can this be?

Sorry for the trouble.
The market is my nation. Traders, my family. Hello, brothers and sisters!
  • #2
  • Dec 29, 2006 12:29pm Dec 29, 2006 12:29pm
Just a couple of ideas here (don't take them too seriously) but I guess the US economy is going so well that the people who used to live in trailers can now afford homes. That also goes for all the people living in government housing, and people who used to live with their parents. How quickly is the workforce population growing?

Or the stats could just be a uhmm... wrong. But don't quote me on that.

But I'm just trying to think out of the box here.
  • #3
  • Dec 29, 2006 1:03pm Dec 29, 2006 1:03pm
I thought I would move this thread from the lounge to the news room. and if I may, expand the topic a bit...


In addition to who buys these homes, How does the increase or decrease affect currencies and the economy at large?
  • #4
  • Dec 29, 2006 1:14pm Dec 29, 2006 1:14pm
you are interpereting the number wrong. new home sales are reported at the annualized pace. so for the number we got on wednesday, it was 1.05M new home sales. that means that in the November there were actually 87,500 new homes sold (1.05 / 12 = 0.0875). dont ask me why they report it at annualized pace, that is just the standard everyone uses. its kind of like stating your speed in MPH, or stating your revenues as a run-rate. there are other indicators reported as annualized, such as vehicle sales and US GDP, its a bit tricky!
Relax and be happy.
  • #5
  • Dec 29, 2006 1:17pm Dec 29, 2006 1:17pm
Quoting StockKJay
I just dont understand, given population growth and other factors.... how can this be?
oh btw, great observation, im surprised no one else asked this quesiton before!
Relax and be happy.
  • #6
  • Dec 29, 2006 1:50pm Dec 29, 2006 1:50pm
Quoting StockKJay
I know there are brilliant minds here at ForexFactory, I am obviously not one of them. I am very puzzled about New Home Sales. If you look back over the whole year there were about 13million or so new home sales... my question is: Who buys these homes? Last year there were even more new home sales than this year... so over the past two years there have been what... 30 million new homes saled? Existing home sales makes sense, people move all the time.

Please explain the numbers to me and how it makes sense to you. Anyone can leave a response, I would like weird theories as well.

Corporations foreign or domestic purchasing new homes?
Individuals (Gates, Buffet etc) buying massive numbers as investments?

I just dont understand, given population growth and other factors.... how can this be?

Sorry for the trouble.
It does not have to be all from increase in population. The % of people buying new homes vs. renting old ones may be rising.
  • #7
  • Dec 29, 2006 3:16pm Dec 29, 2006 3:16pm
You wouldn't ask that question if you lived in California, where I've lost 100K on paper in my home, and now the new homes being built down the road are only 40K more... no wonder no one on my street can sell their home and it's taking them 8-12 months to do so. (And my house is only 9 years old)

When I first moved to Cali, a house was up for sale on Monday, and sold by Wednesday.

These days, builders just add incentives to sell the homes. They are already making a crapload... they can come down plenty to get people to buy...
Mr. Trend
  • #8
  • Dec 29, 2006 3:21pm Dec 29, 2006 3:21pm
Some of the sales are from people moving up or moving down in size, more expensive and less expensive that what they currently own. Relocations due to new jobs or retiring etc. Vacation homes and speculators are just a few more of the reasons for new home purchases.
  • #9
  • Dec 29, 2006 6:01pm Dec 29, 2006 6:01pm
Im a commercial/residential building inspector in the St Charles MO area. In my side of town, the boom is happening bigtime. In Mar of this year I had 1 major sub go in with 680 single family, and 36 12 unit condos. In june a 980 single family, and Sep a 550 single family. I have several other smaller subs in mid to late phase. These homes range from base 140k to over 1M completely covering the spectrum. From March of this year until now, there is approximately 550 new famalies enjoying there new homes at present.

All of these people are mostly upgraders. some are first timers, and just a few are relocaters(from out of state) The upgraders are generally coming from a less desireable area, and a smaller house. The new areas offer great brand new school systems, well planed infrastructure, retail out the wazoo within just miles, safety and security. Builders are building communities now days, not just homes. In my 980 there are 3 major parks, biking and hiking trails, 2 community pools, on site day care, a 9 acre lake with fish, tennis and BB courts, pavillions, the list goes on and on. You can see the attraction.

It is all about quantity now days, not quality. God can I attest to that, I need a new pen every few days. But to the point. The faster you build, the less overhead, volume salesis the thing. The price does vary as to the bottom dollar between subdivisions. Alot depends on the land deal being firsthand or third. I know prices vary greatly across the country but what you can get in my area for 225-250k is one hell of a house. 4 bed, 3 bath, with higher end fixtures and good archatecture. In the last month or so I have seen spec homes go for about 60-70% of original price to clear inventory for tax time. So if you ever want a new home, buy a spec in Dec. It happens every year and you can save 10's of thousands.

Anyway in summary. You arent buying just a house anymore. You are buying a home within a community and all that comes with that community. An attractive offer for anyone.

Just my .02 from the frontlines.
  • #10
  • Dec 29, 2006 7:08pm Dec 29, 2006 7:08pm
Wow thanks for asking the question. Finally something where I can make a meaningful contribution to the forum.

Someone in my family is one of the corporate sales trainers for the worlds largest home builder.One of the top sales people before that.
The people buying most of the new homes that would be the median priced homes are either folks getting ready to leave the nest(same as always), ethnic groups that can finally take part in the American dream usually the first generation and people moving to the USA from all over the world. There are interpreters in many languages available to the sales staff if needed and despite what you might read in the news and see on the TV the USA is still the place to come if you want to make something out of your life and you have something to offer. The mega high priced construction usually goes to sports, entertainment and entrepreneurs ( forex traders?).Now here is the interesting part for a trader. Don't just look at the reports and think you know the health of the housing industry. Surprise surprise somebody or many somebodies are cooking the books. There are substantial downsizing movements in the housing industry for there management, training and outsourcing personnel. With the exception of a few areas in the country this will continue and is expected. It is the normal business cycle, law of supply and demand. I would suspect if you could look in the banking industry you would see downsizing in the areas concerned with mortgages. Just as a side note do you realize the word mortgage is Latin for Death Grip.
Happy piping in the new year.
  • #11
  • Dec 29, 2006 8:33pm Dec 29, 2006 8:33pm
LOL guys he is asking how we can sell 30mil homes in 2 years, with a population of only 300mil people in the US. the answer is "you cant!" that would mean 10% of all men women and children bought a new house in the last two years LOL!

the reported number is the annualized pace.
Relax and be happy.
  • #12
  • Dec 29, 2006 10:04pm Dec 29, 2006 10:04pm
There are people here in the SF bay area buying homes in the fly over states where the prices are so cheap. A new grad living at home with his parents can afford to pay the mortgage given he has a renter living in his investment home. And I think that's more risky than trading forex?

Anywho, there groups out here that uses real estate as a way to become a millionaire on paper. A conservative plan takes about 6-8 years to become a millionaire on paper if home appreciation continue to be 10% per year.
  • #13
  • Dec 29, 2006 11:51pm Dec 29, 2006 11:51pm
Quoting nitman
There are people here in the SF bay area buying homes in the fly over states where the prices are so cheap. A new grad living at home with his parents can afford to pay the mortgage given he has a renter living in his investment home. And I think that's more risky than trading forex?

Anywho, there groups out here that uses real estate as a way to become a millionaire on paper. A conservative plan takes about 6-8 years to become a millionaire on paper if home appreciation continue to be 10% per year.
I live in the Bay Area. I'm not going to be a millionaire any time soon. LOL.
Mr. Trend
  • #14
  • Dec 30, 2006 2:01am Dec 30, 2006 2:01am
Quoting StockKJay
my question is: Who buys these homes?
I think people from all over the world can buy a house or a land in America as long as they have money. Don't you know Sultan of Brunei bought a $10 Million house in the States, but never live there?
"Even the word impossible says that I M possible"
  • #15
  • Dec 30, 2006 9:07am Dec 30, 2006 9:07am
I read on Bloomberg (I think) that this New Home Sales number doesn't take into account the number of cancellations of new home orders meaning that this number only counts how many people filled to buy a new home but doesn't consider those who pulled out of the deal for whatever reason.
  • #16
  • Dec 30, 2006 9:35am Dec 30, 2006 9:35am
You have to live in a high growth state. That way such a question never crosses your mind. Where the developers run the gov't and do what they want, including circumventing and writing their own laws and codes. And build hundreds of bland cookie cutter(and oftentimes shoddy) houses in exurbia with no infrastructure. Most often in some of the high growth states...ignoring some of the other states where I understand they have housing booms(like Lancaster, Pennsylvania), just about every driveway contains a car with an out of state plate. Out of staters more than kids buying houses.
  • #17
  • Dec 30, 2006 9:40am Dec 30, 2006 9:40am
Quoting C.E.O.
Im a commercial/residential building inspector in the St Charles MO area. In my side of town, the boom is happening bigtime. In Mar of this year I had 1 major sub go in with 680 single family, and 36 12 unit condos. In june a 980 single family, and Sep a 550 single family. I have several other smaller subs in mid to late phase. These homes range from base 140k to over 1M completely covering the spectrum. From March of this year until now, there is approximately 550 new famalies enjoying there new homes at present.

All of these people are mostly upgraders. some are first timers, and just a few are relocaters(from out of state) The upgraders are generally coming from a less desireable area, and a smaller house. The new areas offer great brand new school systems, well planed infrastructure, retail out the wazoo within just miles, safety and security. Builders are building communities now days, not just homes. In my 980 there are 3 major parks, biking and hiking trails, 2 community pools, on site day care, a 9 acre lake with fish, tennis and BB courts, pavillions, the list goes on and on. You can see the attraction.

It is all about quantity now days, not quality. God can I attest to that, I need a new pen every few days. But to the point. The faster you build, the less overhead, volume salesis the thing. The price does vary as to the bottom dollar between subdivisions. Alot depends on the land deal being firsthand or third. I know prices vary greatly across the country but what you can get in my area for 225-250k is one hell of a house. 4 bed, 3 bath, with higher end fixtures and good archatecture. In the last month or so I have seen spec homes go for about 60-70% of original price to clear inventory for tax time. So if you ever want a new home, buy a spec in Dec. It happens every year and you can save 10's of thousands.

Anyway in summary. You arent buying just a house anymore. You are buying a home within a community and all that comes with that community. An attractive offer for anyone.

Just my .02 from the frontlines.
Very good explaination, well said. But I can't stand the rules and kangaroo courts that those subdivisons set. Stalins housing had less rules.

There are a few ritzy area's where they tear down a modest house on a plot of land and build a megahouse/mansion. I wonder what percentage of new houses that could represent. Probably still too small of a %
  • #18
  • Dec 30, 2006 1:13pm Dec 30, 2006 1:13pm
New home sales represent a small portion of all homes (new and old) sold in a year.

Don't get me started on the "condo nazi's" that are all over South Florida. A lot of you would be surprised at what people predominatly fall into this group. Think opposite, if you know what I mean.
  • #19
  • Dec 30, 2006 11:42pm Dec 30, 2006 11:42pm
Quoting C.E.O.
... So if you ever want a new home, buy a spec in Dec. It happens every year and you can save 10's of thousands.

Just my .02 from the frontlines.
In a younger life I built houses/New Homes.
Around 50 a year or so.
95% Pre Sold and the other 5% Spec.
Come year end the push was to liquidate those specs...
"Hey buddy, wanna buy a brand new house? 5% below market"

Having primarily retired from Trading FX, AND being pummeled by a Home Builder I have known for decades, I agreed to a two year contract to build homes for him in Alberta Canada. In the 1st month I have given keys to young couples who were moving from the New Home The Builder built for them less than a year ago. Why? The 10s of thousands of $ Profit they made from selling their 1 year old house.
Crazy World but there is Income to be Earned Everywhere.

New Home Sales is more of an Indication of Accumulation than Population.
  • #20
  • Dec 31, 2006 2:38am Dec 31, 2006 2:38am
Quoting Bemac
In a younger life I built houses/New Homes.
Around 50 a year or so.
95% Pre Sold and the other 5% Spec.
Come year end the push was to liquidate those specs...
"Hey buddy, wanna buy a brand new house? 5% below market"

Having primarily retired from Trading FX, AND being pummeled by a Home Builder I have known for decades, I agreed to a two year contract to build homes for him in Alberta Canada. In the 1st month I have given keys to young couples who were moving from the New Home The Builder built for them less than a year ago. Why? The 10s of thousands of $ Profit they made from selling their 1 year old house.
Crazy World but there is Income to be Earned Everywhere.

New Home Sales is more of an Indication of Accumulation than Population.

Based on the rapidly increasing number of forclosures in our newspaper, I would say that the people who buy these new homes are those who cannot afford them.

Lou
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