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Housing; The New Normal. Who Can Afford It?

The new home market, held down by high prices and low supply of units, appears to be stalling further, not accelerating, as the spring unfolds. The housing market index fell 1 point to 45 which is 3 points below the low-end forecast. And weakness is centered in current sales, down 2 points to 48 in a reading that points to further trouble for new home sales.

But expectations for future sales are strong, up 1 point to 57, while traffic is weak but improving, up 2 points to 33. Breakdowns show mid-to-high 40 readings for all regions except the Northeast which is by far the smallest region for new home sales and is lagging badly.

The new home market in general has been lagging badly, lagging both the economy and holding down the housing sector. March new home sales fell a very surprising 14.5 percent in March and today's report doesn't point to much improvement for April and May.

The "new normal"?  With new job creation being either at the very low end, or very high end of the pay range, once must consider the enormous "middle"  being left out........and what that effect will have on potential buyers.  Add to that higher downpayments and that the majority of the gains the last five years went to the upper earners and fears of another crash or bubble from the younger generation (the cream of the crop buyers) and I just don't see the majority of the U.S. having the ability to buy a new home.  Large corporations have been the majority buyer the last five year however that trend is unsustainable.  Kids graduating earnings $10/hr just won't be buying.  Plain and simple.  It's the new normal if you ask me.  Just my .02

Note:  We have previously recommended shorts in builders TOL and PHM in our short ideas chart section

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