Monday saw both good and bad news
on US home sales – which would you like first, the good news or the bad news?
The good news is that, in June, US
home sales were on the dramatic upswing – the single largest monthly increase
in some eight years – an 11 percent increase as reported Monday by the Commerce
Dept., significantly higher than the 3 percent which had been forecast. So far, so good.
The bad news is that prices are in
‘Do the Limbo’ territory – how low can you go? Median prices took a nosedive to
$206,200, as compared to $232,100, just a year ago – a drop of some 12 percent. And far too many ‘for-sale’ houses
remaining on the market meant that new home sales took a real dive and were
down some 21.3 percent as compared to June 2008, one year ago. Worst hit of the regional markets for
new home sales were the whopping numbers for the South, down more than 33
percent; the Northeast was down 11 percent; the West down 10 percent, and; only
the Midwest showed positive numbers with new home sales up 6 percent.
New homes must compete both with a
glut of foreclosures and with desperate sellers of other homes, some of whom
are hanging on by their financial fingernails. Even so, housing starts were up some 3.6 percent over a year
ago as some builders are tentatively dipping a toe back into the new home sales
waters and considering returning to the market. It has been some three years now that the US housing market
has been in a slump.
Economists and many others are now
waiting with baited breath for Tuesday’s announcement of the figures from the
Standard & Poor’s Case-Shiller Home Price Index of 20 major metropolitan
areas; projected is a 17.9 percent year-over-year decline in prices. Whatever the real numbers will be (and
you will have them by the time you read this), these figures will provide real
evidence of whether the long slide in home prices will be lessening much in the
near future.
This is officially now the worst
housing downturn since the Great Depression of the 1930’s. Some feel that this increase may be a
function of just how low things were back in January (we are seeing something like
a 17 percent bounce-back since then); others credit it to low prices, excellent
interest rates (if you qualify, and that’s a big if) and the $8,000 first-time
home buyer tax credit being offered by the federal government now. But, it is very hard right now to sell
new houses and they have never sat longer on the market than they do now: the median
time that a new home is on the market before selling is at an all-time high of
11.8 months – that does not bode well for struggling builders. Adding to that is the massive inventory
of homes on the market – huge numbers of homes languishing on the market (plus
a glut of foreclosures) bring those prices down, down and even further down.
The other problem is the high rate
of unemployment, as employment is the lagging indicator which will stay with us
even if a real recovery takes hold as this year wears on. People without jobs, or fearful of
losing their jobs, do not generally buy houses – if anything, they sell them, or
lose them to foreclosure.
So, does this mean we are climbing
out of the hole that housing has been in these past three years? Monday’s stock markets did not vote
their confidence in the Commerce Department’s announcement of these gains in
home sales as the Dow, Nasdaq and S&P all fell, despite what some feel
could actually be encouraging news.
Also, June is historically a healthy month for home sales with June and
its fair weather in many parts of the US often being the pinnacle of ‘Spring
Selling Season,’ one of the best times historically to try to sell a home. New home inventories are falling and
that is encouraging after so much bad news, but inventories are still higher
than the historical norms. It is further
likely that June’s stronger home sales numbers were pushed even higher by what
are perceived as bargain-rate fire sale prices, that could not have left many
sellers very happy with what they received.