- Markets remain sluggish
- Sales are down
- Unemployment casts a threatening shadow
- Business investment is still hanging in there
- The bogeyman is shadow lender inventories
Real estate sales are down right across America. The reason for this is simple. Potential buyers are fearful of losing jobs, and with these, down payments, credit records and their sense of worth as well. This is not helping realtors and new-home builders either.
Sluggish Markets
American new house sales hung on at 300,000 last month. This is the second worst achievement since records began. The Commerce Department will confirm this sorry fact in its next report. Statisticians use new home sales as a leading indicator of the state of the property market, because prices lock-in on the day of sale. The latest figures suggest that markets did not recover following the 27% drop in June month. The lingering effect of federal tax incentives is gone – the nation needs greater government effort to recover the situation.
Emeritus Director at Harvard’s Joint Center for Housing Studies at Cambridge, Massachusetts is in no doubt about this. “Jobs are going to be the key factor in the recovery,” he told me, “and we have a job market that’s sluggish.”
Sales Figures Down
On average, newly built houses are taking twice as long to sell, as was the case in 2008. Total previously owned home sales plummeted down to an annualized figure of 3.3 million, which is the lowest since 1995. At this rate, it will take almost 12 months to clear the current backlog – and this excludes new entrants to the market, and bank inventories held in reserve.
This underlying weakness in demand is a reflection of both unemployment fears, and a general lack of confidence in the American property market. Most Americans are waiting to see which way the economic cookie crumbles before they make their move.
The Shadow of Unemployment
The Labor Department has downsized its June report and advised less than hoped for growth in July too. Company payrolls increased by a disappointing 71,000 and all indications are that the unemployment rate of 9.5% will hold steady for the rest of the year.
“Housing’s incapacity to turn around is a very big reason why this recovery is so weak,” Ellen Zentner, Senior Economist at Bank of Tokyo-Mitsubishi in New York, recently said.
Business Investment
On a more positive note, the Commerce Department believes that new equipment acquisitions continue to have a positive effect on the American economy.
Foreclosures Dominate the Supply Chain
The huge real estate owned inventories in the hands of lending banks loom over staggering property prices. “We need resale inventory, namely foreclosure inventory, to come down before we’re going to see any meaningful move in the housing market,” a leading real estate analyst believes.
Find stunning foreclosure real estate at www.foreclosuredatabank.com.
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Written by Alex Rolim.
