Tuesday, August 24, 2010

Existing Home Sales Fall to 15 Year Low: Not Good News for Sellers

Existing home sales in the United States fell more than 27% in July 2010 over the previous month, not good news when you consider:


1.  Existing home sales are 80% of the U.S. residential real estate market.


2.  The summer is the peak buying season for shoppers eager to find new homes before Labor Day.


3.  Interest rates are at historic record lows.  Some mortgages are now in the 3% range.  4% is common.


4.  Sellers are already heavily discounting their home prices, including 10% or more since January 2010.


If you can't sell real estate under these conditions, when can you?


The answer is, of course, when the unemployment rate falls by about half from its current level, when the Federal government stops meddling in the economy which has put a chill on all economic growth (especially corporate spending), and when the current housing inventory is absorbed.


The last point will take about four years at current rates.  The first two points are up for grabs.  I see no catalysts in sight that improve this situation anytime soon.  NONE AT ALL.


If you look at the above chart, the bump up in 2009-2010 is from Mr. Obama's first time homeowner tax credit which expired earlier this year.  Otherwise, the market is stagnant and will stay that way for what I fear will be years to come.