Sales of existing homes were downright dismal in July. From The Atlantic:
The housing bears were right: existing home sales fell off a cliff in July. As my colleague Megan McArdle just noted, they sold at an annualized pace of 3.83 million, down by 27% versus June and 26% below July 2009, according to the National Association of Realtors. This is the lowest rate since NAR began keeping track of monthly sales in 1999.
I think the graph, courtesy of The Atlantic, says it all (notice the uptick in sales in March and April as the homebuyer tax credit expired):
Sales of existing homes fell a cliff in July.
Sales of new homes fared even worse, dropping to record lows. From Marketwatch:
Sales of new homes in the United States fell to all-time record low in July, as demand from consumers has dried up after tax breaks for homebuyers expired in April, the Commerce Department estimated Wednesday.
Sales dropped 12.4% to a seasonally adjusted annual rate of 276,000 in July, from a downwardly revised 315,000 in June.
The report was weaker than expected, with economists surveyed by MarketWatch expecting a slight increase to 339,000 annualized.
“The report shows the housing industry is still nursing a bad hangover,” said Mitchell Hochberg, principal at Madden Real Estate Ventures in New York, in an e-mail.
Yeah, I’d say the market has a hangover. And that’s what happens when government intervenes to prop up a market badly needing a correction. As with the “cash for clunkers” program, government stimulus pulled demand forward and artificially propped up today’s market with what would have been tomorrow’s sales.
With home sales falling off a cliff, it’s not surprising inventory is starting to pile up. Inventory growth in July was a modest 2.5%, reported The Atlantic, but I think we will see inventory grow significantly in the coming months. Foreclosure activity and mortgage delinquencies are still at high levels, and as inventory grows, prices will have to adjust down to levels that will make it possible to clear the excess inventory. It’s simple supply and demand at work, and right now there is far more supply than demand and prices will have to adjust accordingly.
-CH
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