Economy Alarm: Home Sales Plummet to Lowest Level in 15 Years

President Obama Promised the Stimulus Would Address the Housing and Unemployment Crisis

“In the end, all of us are paying a price for this home mortgage crisis. And all of us will pay an even steeper price if we allow this crisis to continue to deepen — a crisis which is unraveling home ownership, the middle class, and the American Dream itself. But if we act boldly and swiftly to arrest this downward spiral, then every American will benefit…A lost home often begins with a lost job.” (“Remarks by the President On the Home Mortgage Crisis,” whitehouse.gov, 2/18/2009)

Credibility Crash: Home Sales Plunge to 15 Year Low

Existing-home sales plunged to their lowest level in 15 years in July as inventories soared, painting a grim picture for the housing market absent government support in a stubbornly sluggish economy.

Home resales dropped a record 27.2%—nearly twice as much as analysts had expected—to an annual rate of 3.83 million in July, the National Association of Realtors said Tuesday. Meanwhile, inventories rose to 12.5 months from 8.9 months in June, pressuring already depressed home prices. Inventories are at their highest level in more than a decade.

“Historically July is the peak inventory month in any given year,” NAR Chief Economist Lawrence Yun said.

Economists surveyed by Dow Jones Newswires had expected existing-home sales to fall by 14.3% to an annual rate of 4.6 million.

The realtors revised their existing-home sales figures for June downward, saying existing-home sales dropped to a 5.26 million annual rate instead of the initially estimated 5.37 million annual rate.

“The question is whether this pause is a temporary pause,” NAR Chief Economist Lawrence Yun said. The National Association of Realtors is expecting sales to remain soft for much of the rest of the year.

The steep decline in sales in July reflects both a souring in the U.S. economic recovery and the expiration of a government tax credit program that has been supporting the housing market for more than a year.

The tax credits offered certain buyers as much as $8,000 to sign a contract by April 30. Deals originally needed to close by June 30, but lawmakers pushed that deadline to Sept. 30.

Still, the tax credit’s expiration drove pending-home sales down 30% in May and caused a double-digit dive in mortgage-application volumes even as interest rates hovered near their lowest levels in generations. July’s existing-home sales data reflect the May plunge in pending sales, which typically become existing sales within a couple of months. (Meena Thiruvengadam and Sarah N. Lynch, “Existing-Home Sales Plunged in July,” Wall Street Journal, 8/24/2010)