Abysmal Existing Home Sales Fuels Talk of Double Dip
A report from the National Association of Realtors Tuesday showed existing home sales in July plummeted a whopping 27 percent from June, while unsold inventory rose by an even bigger 40 percent to its highest level in more than a decade. The annual rate of sales for the month is the lowest it’s been in 15 years. A spokesman for the NAR secribed the housing market’s horrible mid-summer performance, which affected all four regions of the US, as a pause. Analysts had predicted a drop-off, in response to the expiration of homebuyer tax credits; but their average prediction of a 14 percent drop fell way short of the news delivered Tuesday. In addition to analysts predictions, a drop in sales was also expected because of a drop of 30 percent in May in pending home sales. That was created by the April 30th deadline for buyers to qualify for federal tax credits. Analysts claim that with all the data that has come in, it is becoming apparent that the federal tax credits for homebuyers accomplished nothing more than prompting buyers who would’ve eventually bought a home anyway to buy sooner. Critics have called the program just another example of the government wating tax dollars on ineffective stimulus programs.
The most startling part of the July existing home sales report is that the numbers are more bleak than anything experienced during the Great Recession, when the US economy was declining by more than 6 percent per year. The lowest annual rate of sales during that time was about 4.5 million, significantly higher than the 3.8 million annual rate reached in July. Also, the monthly drop in June affected all four regions of the country, dropping 35 percent in the Midwest, 30 percent in the Northeast, 25 percent in the West, and 23 percent in the South. Unsold inventory, meanwhile, soared from an 8.9 month supply in June to a staggering 12.5 month supply. Compared to last year, sales were down 26 percent. Surprisingly, in spite of an overwhelming decrease in demand, the national average median price for homes actually rose slightly to $182,500.
Pessimistic housing analysts are using the bleak existing home sales as evidence of several of their mantras. They believe the housing sector has not yet hit bottom and that time may be further away than most people think. They are also claiming that with existing home sales below Great Recession levels, we have either already entered or are about to enter another recession. And critics of government stimulus programs say the data proves that the programs have not helped and the situation is not any better because of them.