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August 24, 2010 in Business
Home sales plunge to lowest in 15 years
WASHINGTON — Sales of previously occupied homes plunged last month to the lowest level in 15 years, despite the lowest mortgage rates in decades and bargain prices in many areas.
July’s sales fell by more than 27 percent to a seasonally adjusted annual rate of 3.83 million, the National Association of Realtors said Tuesday. It was the largest monthly drop on records dating back to 1968, and sharp declines were recorded in all regions of the country.
The plunge in home sales also magnified fears about the broader economy.
“The housing market is undermining the already faltering wider economic recovery,” said Paul Dales, U.S. economist with Capital Economics. “With the increasingly inevitable double-dip in prices yet to come, things could yet get a lot worse.”
Sales were particularly weak among homes in the lower- to mid-priced ranges. For example, in the Midwest, homes priced between $100,000 and $250,000 tumbled nearly 47 percent.
As sales have slowed, the inventory of unsold homes on the market grew to nearly 4 million in July. That’s a 12.5 month supply at the current sales pace, the highest level in more than a decade. It compares with a healthy level of about six months.
One reason the market is hurting is that buyers and sellers are in a standoff over prices. Many sellers are reluctant to lower their prices. And buyers are hesitating because they think home prices haven’t bottomed out.
“It really is a self-fulfilling prophecy,” said Aaron Zapata, a real estate agent in Brea, Calif. “If all buyers perceive that home prices are coming down, then they will stop making offers — and home prices will come down.”
The housing market is also being hampered by the weakening economic recovery. Unemployment remains stuck at 9.5 percent and many potential buyers worry they might not have a job to pay the mortgage.
Prices have fallen in part because foreclosures are running about 10 times higher than before the housing bust. Though the average rate for a 30-year fixed mortgage has sunk to 4.42 percent, many people can’t qualify because banks have tightened their lending standards.
Home sales picked up in the spring when the government was offering tax credits. But the tax credits expired on April 30 and the market has been hobbled since.
The drop in July’s sales was led by 35 percent plunge in the Midwest. Sales were down 30 percent in the Northeast, 25 percent in the West and 23 percent in the South.
The median sale price was $182,600, up 0.7 percent from a year ago, but down 0.2 percent from June.
© Copyright 2010 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Life and debt 
Nugget on August 24 at 12:26 p.m.
Obama gave $8,000 tax credit for first time home buyers & $6,000 to others. But… How can you get people to buy houses when they don’t have jobs? Credits mean absolutely nothing if you can’t get a job to pay for the house.
So, how does Obama’s healthcare bill help you? Well, when you are living on the streets during the winter months, you can go to the ER for medical attention.
Dazzeetrader1980 on August 24 at 12:41 p.m.
I think the potential buyers were taken out of the market when the $8 credit was discontinued. BUT Nugget , you’re very correct….no job—>no credit–>no house buying.
Obama’s done a wonderful job! I guess the US was fooled by ideas from a “never had done anything” type who had a completely goofy agenda for the US. Remember this in November. DOW in the 9000’s before long.
Country has no confidence in Obama.
madscientist on August 24 at 12:47 p.m.
Daisy, the countrys no confidenece in Obama has nothing to
do with the market.
This story is about housing market not the S&P or DOW.
Dazzeetrader1980 on August 24 at 1:44 p.m.
Market falls when nobody buys houses. Fact of life. Nobody buys houses because of the Obama policies and his handout of $8 K.
http://www.cnbc.com/id/38830968http://
www.bloomberg.com/news/2010-08-24/stocks-in-u-s-slump-treasuries-rally-as-home-sale-data-point-to-slowdown.html
Unemployment up, no money, no house buying, bleak outlook.
More to follow.
Obama never managed a kool aid stand. Smart guy? Who says so? Unprepared for the Presidency. Nice guy maybe but inept.
madscientist on August 24 at 1:48 p.m.
the housing market is not the presidents fault. housing markets go up and down just like any other industry (dotcom bubble) is a recent example. To saw the president is responsible for your house not selling is not acurate. If the banks didn’t give people adjustable mortgages to people who could not afford them the housing market would not be how it is. Fortunately I follow the charts and sold my house in 2006 before the housing market tanked. I suggest you do the same and quit blaming everything on one person.
west on August 24 at 1:51 p.m.
Another 10 -15 years and the housing market will be like it was in 2007. Face it folks, this is a depression..it will take many year’s to get out of it. Companies are stupid to hire people on business tax credits for new hires…Obama’s thinking. Hell, they got to pay benefits to these new people..and if their product they make isn’t selling….ya don ‘t need new employees. Verner’s budget is going to be a deficit for a number of years..even when she’s gone……….. unless cities costs come down like private companies ( a lot less employees)!.
Diana on August 24 at 3:02 p.m.
Daisy, you’re so cute when you post as if the economic crash happened on January 20, 2008.
We were losing 800,000 jobs a month and 100,000 each month more than the previous month under Bush and when Obama came in. Now we already had 7 consecutive months of private sector jobs growth.
If you want to call this a “failure” under Obama, then how would you call the job situation under Bush?
I wonder what it would be like if John “the fundamentals of the economy are strong” McCain were in charge. Oh wait! I forgot about when he suspended his campaign and raced back to Washington to fix it!
Blondscence on August 24 at 3:10 p.m.
OK mad . “Fortunately I follow the charts and sold my house in 2006 before the housing market tanked. I suggest you do the same and quit blaming everything on one person.”
This housing problem is just a reflection of other problems. Real Estate is the “hub” and everything else are the spokes. When real estate suffers, everyhing suffers.
But the problem is multifold. It’s not 2006 so I can’t do the same..as you say.
In this case Obama gave quite a bit of money to the banks and other large corps and they kept it. It looks like this housing problem will be around for a long time. Unemployment is a very long lasting worry.
Like it or not, there wss no recovery. I don’t know about a double dip…or a “W” whape. I think it’s a “U” with a very long bottom. What Obama’s done is allow our coffers to be used for bailouts and such. Baileouts cause other problems. He ( like Daisy said above) simply was too inexperienced to know the consequences. It’s HIS economy now. If it rises, he’s to blame. If it falls, he’s to blame. Sometimes I wonder if he should stay on vacation so something can get done.
de3 on August 24 at 3:14 p.m.
I agree with MadScientist writing “the housing market is not the presidents fault. housing markets go up and down just like any other industry (dotcom bubble) is a recent example”.
The problem is that when the economy is good, all politicians claim it is good because of their policies.
Since politicians take credit for good economies, it is easy to see that people will blame the politicians for bad times too. The politicians cannot have both ways.
Bush deserves blame for idiotic policies leading in to the Depression crash. Obama deserves blame for idiotic policies enacted afterwards, of which there have been many.