Home Sweet Home, retiree nest eggs, & more
Home prices are up quite a bit since 1968 but the portions of equity owned by homeowners have declined dramatically, according to the Federal Reserve and National Association of Realtors.
The average home price in 1968 was $20,100; this year it is $190,600 (down from a high of $221,900 in 2006).
But the portion of home equity owned by homeowners has declined from 65.8 percent back in 1968 to 47.9% last year (final figures for 2008 are not yet available.)
Recent data shows that new single-family homes sold at an annual rate of 433,000 in October. This is slower than the consensus 441,000 expected. New home sales are down 40.1% compared to a year ago and down 68.8% compared to the peak in 2005.
New sales were down in the South and West, but up in the Northeast and Midwest.
Based on the current sales pace, the supply of unsold new homes has risen to 11.1 months in October. But the inventory of new homes fell to 385,000 in October, down 32.5% from the peak in mid-2006. The median sales price of new homes was $218,000 in October, down 7.0% versus a year ago. The average price of new homes sold was $272,300, down 12.2% versus last year.
What does this mean?: We just saw new single-family homes sales in October drop to the lowest level since 1991. However, even so, home builders are continuing to deplete excess inventories. This was possible because new home sales still exceed the number of homes being built for sale. Total new home inventories are 385,000, the lowest level since 2004. The number of unsold completed new homes – a key determinant in for future construction and price changes – peaked in January 2008 at 199,000 and has declined to 172,000. This is the steepest decline on record. Seemingly, there is more pain to come but the light at the end of the tunnel for the housing sector is gradually coming into view. Based on the current risk aversion hysteria in October and low mortgage rates, it is likely we are very close to the bottom for new home sales. New construction will probably not hit bottom until late 2009 and price declines should slow and be less harsh compared to last year.
Retirees hoard savings
A majority of retirees avoid touching their nest eggs and live solely on Social Security and pension benefits, found a survey for Nationwide Insurance.
Some 57 percent said they are not touching their savings. The average retiree in the survey had $100,000 or more in savings.
Eighty-four percent of the retirees said they can live comfortably on their retirement income and don’t need to tap their nest eggs.
Pensions beat 401ks
The average pension plan outperformed the average 401k plan by one percentage point per year from 1995 through 2006, says Watson Wyatt Worldwide, a pension consulting firm.
It attributed the performance advantage to professional management of pension plan assets, which may have added discipline and investment tools not available to workers making their own decisions about their 401k account investments.