In yet another clean sweep, the third in a week or so, sales of existing homes dropped twice as much as expected, worse than every economist forecast, to a 15 year low. Inventory soared to 12.5 month, the highest since 1999. Treasury yields plunged with yield on the 10-year note falling as low as 2.50 and the 2-year note hitting a new all-time low at .47%.
Please consider Sales of U.S. Existing Homes Drop More Than Forecast
Sales of U.S. previously owned homes plunged 27 percent in July, twice as much as forecast, evidence foreclosures and limited job growth are depressing the market.
Purchases plummeted to a 3.83 million annual pace, the lowest in a decade on record keeping and worse than the most pessimistic forecast of economists surveyed by Bloomberg News, figures from the National Association of Realtors showed today in Washington. Demand for single-family houses dropped to a 15- year low and the number of homes on the market swelled.
A tax credit of up to $8,000 boosted sales earlier in the year, pulling forward demand and indicating additional advances will prove difficult. Mortgage rates at record lows have provided scant relief to the industry as unemployment hovers close to 10 percent, foreclosures hold near record-highs and the economy cools.
“This is a devastating reading on the U.S. housing market,” said Derek Holt, an economist at Scotia Capital Inc. in Toronto. “There’s such an inventory overhang, it shows there will be pressure on prices” in the months ahead.
The pace of existing home sales is the slowest since comparable records began in 1999. Purchases of single-family homes dropped to a 3.37 million annual rate, the lowest since May 1995.
Range of Forecasts
Economists projected sales would fall 13 percent from June’s previously reported 5.37 million pace. The agents’ group revised the June sales figure down to 5.26 million. Estimates in the Bloomberg survey of 74 economists ranged from 3.96 million to 5.3 million. Previously owned homes make up about 90 percent of the market.
The number of previously owned homes on the market rose 2.5 percent to 3.98 million. At the current sales pace, it would take 12.5 months to sell those houses, the highest since at least 1999 and compared with 8.9 months in June. The months’ supply of single-family homes at 11.9 months was the highest since 1983, the NAR said.
Extend and Pretend
The only thing this administration knows how to do is extend and pretend. The latest gimmick offered on August 11, 2010 is HUD Offers Interest-Free Loans to Reduce Foreclosures.
The Obama administration will offer $1 billion in zero-interest loans to help homeowners who’ve lost income avoid foreclosure as part of $3 billion in additional aid targeting economically distressed areas.
The Department of Housing and Urban Development plans to make loans of as much as $50,000 for borrowers “in hard hit local areas” to make mortgage, tax and insurance payments for as long as two years, according to a statement released today. The Treasury Department will also provide as much as $2 billion in aid under an existing program for 17 states and the District of Columbia, according to the statement.
The initiatives will help “a broad group of struggling borrowers across the country and in doing so further contribute to the administration’s efforts to stabilize housing markets and communities,” Bill Apgar, HUD’s senior adviser for mortgage finance, said in the statement.
Fool’s Offering vs. Free Rent
Anyone going $50,000 deeper in debt to “save” their existing underwater home is a complete fool. On the other hand, anyone who takes the cash as an offer for free rent with a plan to declare bankruptcy and walk-away later just may be thinking clearly.
Thus, it is likely that the fool in this case is the Obama administration. The only thing this stupid program will do is waste taxpayer money while pushing foreclosures into the future.
Meanwhile the number of negative surprises continues unabated.
- 58 out of 58 Economists Overoptimistic on Philly Fed Manufacturing Estimate; Median Forecast +7 Actual Result -7.7, a “Veritable Disaster”
- Weekly Unemployment Claims Hit 500,000, Exceed Every Economist’s Estimate; No Lasting Improvement for 9 Months
Recession Never Ended
As I said in 3rd Quarter GDP Likely Negative, Recession Never Ended …
While some people still think the odds of a double dip recession are close to zero, ironically, the only reason they may be right is if the first dip never ended.
Amazingly, economists are still clinging to estimates of 2.5% and up.
So expect to discover the vast majority of economists will be surprised at the forthcoming downward revisions, even after we point these things out well in advance and repeat them.
The ECRI is still touting the “flattening” of the Weekly Leading Indicators (WLI) at -10. With the collapse in treasury yields, a print of -500,000 on weekly claims, and a god-awful Philly Fed report, let’s watch the next few weeks. I suspect this “flattening” period will soon be over.
Fooled By Stimulus
Nearly every economist has been Fooled by Stimulus even though the structural problems still remain.
It’s time to face the facts: There never was a “recovery” by any rational measure. The alleged recovery was nothing more than inventory replenishment fueled by massive and unsustainable government
spending waste with additional trillions of taxpayer dollars handed out in bank bailouts.
The plunge in existing home sales shows exactly what happens when free money handouts stop.
Mike “Mish” Shedlock
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