Summer of recovery – July existing home sales at 15-year low
Ouch. Although some analysts suggested July home sales would drop around 12 percent, the figures just in from the National Association of Realtors indicate July existing home sales numbers dropped more than 27 percent.
Existing home sales dropped a record 27.2 percent from June to an annual rate of 3.83 million units, the lowest since May 1995. June’s sales pace was revised down to a 5.26 million-unit pace from a previously reported 5.37 million.
Analysts polled by Reuters had expected sales to fall 12 percent to a 4.70 million-unit rate last month.
“This is a worrisome report and while it reflects the volatility caused by the end of the (government home-buyer) tax credits, it also indicates a deterioration in the underlying trend for housing demand,” said Michelle Meyer, senior U.S. economist at Bank of America Merrill Lynch in New York.
Are buyers – if there are any – waiting for another federal government program to buy a house? Maybe yes, maybe no, but the home buyer credit program seems to have simply moved some home purchases up a quarter or two with buyers jumping in before the credit expired back in April. Just like cash-for-clunkers, the program has not kick-started anything.
I’ll be the one of the first people to say that government probably should not be involved with “kick starting” the housing market as it would make sense the economy could do that on its own. Are we able to figure out the return on investment here? How many would have purchased anyway? How many moved their purchase decision forward? How many were renters who purchased because of the deal?
Renting is not a bad thing, and we should not be providing home loans to those who can not afford a home. In a certain context, I understand Congress’ – and yes, the Bush Administration’s – drive to encourage home ownership simply because of the perception of value (if you own something and have an investment in it, you’ll treat it better). But it was flat out wrong to push that with the availability of easy credit.
More on the home sales drop over at Hot Air.
"Renting is not a bad thing, and we should not be providing home loans to those who can not afford a home."
Amen, Steve, great post-you are absolutely right.
One major problem is that those who paid inflated prices for their homes at the end of the bubble will be very unwilling to sell for realistic prices, and you can't blame them. But a house is only worth what someone is willing to pay for it.
I have to disagree on the cash for clunkers program, the automobile companies have become profitable in recent months. But it was wrong to allow people to purchase homes they could barely make payments on. They were targets of predatory lenders who easily talked them into adjustable rate mortgages which rose and coupled with the huge increase in oil prices left them unable to make payments. It wasn't just poor first time buyers it was also people buying mcmansions at artificialy inflated prices when they should have gotten something more reasonably priced. I feel that it can all be traced back to de-regulation.
Cash for clunkers? Gotta respect more data than just a quarter of profit. Lots to consider including how many lost jobs in the industry. Also, how about used car prices going up more than 10 percent. Then there is the used parts market … all of those cars crushed … most of them for no good reason at all.
You're respecting only one month of home sales figures. I recently saw a documentary on HBO about the closing of a GM plant in Ohio, absolutely heart breaking, I know this will be dismissed as propaganda from the left but at the end of the show they posted a statement that said every job at an American automobile company affects 7 other jobs in this country. We need to do whatever it takes to help.
My "micro" business, affects others too. As a product design firm, we regularly subcontract to freelancers and use outside sources such as rapid prototyping, material suppliers, courier companies, etc. We have hit some hard times but we "tighten our belt" and slug through the slow periods. There is no bailout money for us!
We create a flow of cash just as important as any large corporation but, more importantly there are millions of small businesses like us that drive this economy and have a much greater effect on it, and yet, we are forgotten or, worse, penalized by the tax hikes looming.
We personally are in no position to "move up" in houses because there is a looming fear!
Existing home sales down 27%, new homes down 12%, all the while interest rates at 4.5% (Prime rate at 0%). Double dip ahead? No, more like Depression!
What the heck ever happened to 20% down and paying PMI if you didn't make 20%? In other words, you have skin in the game. It worked for us: we scrimped and saved for a down payment, and bought a house that we knew we could afford even if we were down to one income. We refi'd down from 8% to 4 and 5/8 when we could, and have been putting extra principal payments in whenever we can. Not having mortgage payments is like a pay raise, and the prospect of that is the goal. Dave Ramsey is like a god to me! 😉
What ever happened to common sense? You are only a sucker if you allow yourself to be played for a sucker.
Cash for clunkers wasn't much better. It sucked people into trading in (for destruction) serviceable vehicles that they could have continued to drive for a minor expense, or sold it to someone that couldn't afford a new car and all the depreciation that comes with it. Now they have a 5, 6 or 7 year loan to add to their debt load. As Steve mentioned, the price of used vehicles was driven upward by supply and demand, further hurting the low end buyer. The car companies got a brief blip in sales, but followed by another dry spell. Wasn't the money that the clunker program eventually paid out also added to your income?