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Building Business

Existing-Home Sales Data for July Offer Few Surprises

Richard Defendorf, contributor

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The National Association of Realtors’ release on Tuesday of existing-home sales numbers for July were preceded by the usual crescendo of analyst expectations and rationales, and then, because the numbers were expected to be especially lousy, some Olympic-level breath-holding.

The numbers were indeed lousy, showing a 27.2% drop in sales (almost twice what analysts expected) and a rise in inventory to 12.3 months from 8.9 months in June, while year-over-year prices for all existing-home categories remained flat. The seasonally adjusted annual rate is now at 3.83 million units. But for those on the ground in real estate and homebuilding, the predictive exertions and breath-holding probably weren't necessary, and the plunging sales figures, while certainly a concern, aren't a revelation. 

Homebuilders participating in the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), which gauges builder confidence, had already pronounced the new-home market moribund by pushing the HMI for sales expectations for the next six months down 3 points in August. Beyond the expiration of the homebuyer tax credit, builders say the glut of foreclosed properties is putting the biggest hurt on sales. And NAR notes that home prices in the very few metropolitan areas currently showing price appreciation (Buffalo, New York; Shreveport-Bossier City, Louisiana; Elmira, New York; Springfield, Illinois; Oklahoma City, Oklahoma; and Decatur, Illinois), prices were significantly undervalued during the boom.

Looking for strength in fundamentals

Although many observers no longer expect housing to lead a broader economic recovery, as it has during past downturns, the worry is that a couple more months of weakness in the sector could become self-perpetuating as prospective buyers wait for prices to fall further. And with unemployment remaining high and wage growth slow, even extraordinarily low mortgage rates may not be enough to propel sales upward.

"Consumers and housing are in no position to lead us out," Nigel Gault, chief U.S. economist at IHS Global Insight, told the Wall Street Journal. "We've gone through the inventory-cycle boost. The stimulus boost is fading. We're falling back on whatever underlying strength there is in the private sector, in exports and business-equipment spending, and there's not a lot." 

Added economist Paul Dales of Capital Economics: "At this point in the recovery, every little bit counts. A double dip in the housing market and house prices would not be enough to generate another recession. It would certainly help to hold back the recovery." Dales told the Journal he expects home prices to fall to fall another 5% after the 30% decline during the recession.

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Comments (1)

caddcreations writes: I'm no economist but as I step back and look at the big picture I see a generation of consuimers (Me included) that are simply spent out. Over the past twenty years or so we've all built our big houses, filled them with new furniture and appliances, landscaped the yard, bought a car or two, made a few improvements, took a few vacations...

Now it's time to step back, take it all in... and figure out to pay for college!

Ed Slusarski
ed@caddcreations.net
www.caddcreations.net
Posted: 9:13 pm on July 3rd

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