The Housing Markets Doldrums Persists
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July 2011 Existing Home Sales Up 21 Percent From July 2010 at 4.67 Million SAAR — But Were Down 3.5 Percent Sequentially From June 2011 — Median Price Down 4.4 Percent Year-Over-Year at $174,000
Year over year home sales rose 21 percent from July 2010 to July 2011 (just as I had forecast last month in my blog, “Also expect an increase year-over-year in July due to the June 2010 cannibalization effect of housing sales from the $8,000 tax incentive. “) What I had not forecast, however, was a continuing deterioration of an already feeble housing market as sales dropped 3.5 percent sequentially from June 2011 to 4.67 million Seasonally Adjusted Annualized Rate (SAAR) despite a continuing drop in interest rates.
I do believe that any further decline in interest rates will have no effect what-so-ever on home sales as we are truly in a classic liquidity trap (to be discussed later this week).
The first graph shows the monthly SAAR while the second shows the 12-month moving average of the SAAR existing home sales rate.
I am once again sticking with my forecast of 4.9 million homes (the 12-month moving average of 4.8 million still has some hope of hitting that level). Recall, however, that I believe that 2002 was the last truly normal period, so even if my forecast hits, U.S. housing markets remain 11.3 percent below normal. Yet Washington, D.C., still is doing nothing material to change consumer confidence and the Federal Reserve is down to firing blanks as far monetary policy is concerned.
Prices continue to erode as supply still runs in the plus-9 month inventory level (that is to say, there are enough current listings available for sale to cover 9.4 months of sales assuming that the sales rate of the last 12 months remains the same). The second of the median price graphs below is the 12-month average of the prior 12 months of median home prices and shows the continuing decline in home values. On a year-over-year basis, July 2011 home prices are down 3.1 percent (again—the 12-month moving average) and are off 25.3 percent from the peak in 2006.
While there is no such thing as a national real estate market, the aggregate medians and average statistics of existing home sales data points to continuing slight erosion in home values. However, until job growth rebounds and consumer confidence rises, it looks like the doldrums of the dog days of summer of a residential real estate market continues to go on.
These graphs also show that the $8,000 homebuyer’s tax credit was merely a hiccup in the voyage of the housing market.
Perhaps history is costing more to make than it is worth…..
Please give me your thoughts and comments.