It looks like the Obama White House really does have its job cut out for it: Most economists agree that any meaningful economic recovery must be built upon the foundation of a substantial recovery in the real estate market–the place from where the worst recession since the Great Depression got its start.
But new figures just released this week have shocked many so-called experts because they are not at all what had been expected.
As the Associated Press headline screamed, ” December Home Sales Take Largest Monthly Drop In More Than 40 Years!”
Some thought the figure would, at least hold steady, and, those who by nature are somewhat more optimistic, hoped the figures would actually rise. Instead, December’s sales, according to the National Association of Realtors, fell 16.7 percent. One survey predicted the drop should have been around 10 percent.
Tax Credits to the Rescue! NOT
What has some economists concerned is that this took place even though the government extended the tax credit of up to $8,000 for first time homeowners while even adding a $6,500 credit for existing homeowners who opted to move to new digs.
Writes one economist with Capital Economics, as reported by the A.P.,the report “placed a large question mark over whether the recovery can be sustained when the extended tax credit expires.”
Of course, some would argue there isn’t really all that much of a “recovery” to sustain regardless of when the extended tax credit comes to an end.
Glimmers of Hope?
Yes, there have been some small signs in the housing market of a recovery: sales are, in general, up from a year ago this time, but still down an astonishing 25 percent from four years ago.
The median sales price also showed a very slight increase from the previous year–in fact, the first yearly gain since 2007, says the A.P.
But let’s be real here: while a “meaningful” economic recovery will be built upon a robust rebound of the real estate market, the real estate market itself will not fully recover until the nation stops bleeding jobs. Sure, we are losing fewer jobs in recent months than in the past, but there is still no sign of employers rushing to hire back laid-off workers or create new positions and the unemployment rate continues to , in most states, either hold steady or even get worse. As does the foreclosure rate.
American workers–and that means both current and future homeowners–should be as too-big-to fail as Chase or Bank of America or a number of other large lending institutions.
The latest home sales figures show that help is still needed…because many of us are still failing.
Photo: Y
Related posts:
- High Unemployment & Rising Foreclosure Rates: Yet Homes Sales are Increasing…
- Existing Home Sales Show Recovery Not Here Just Yet
- New Homes Sales UP! Begining Of End For Financial Crisis? Nope. But We Can Dream!
- Investigation into Pending Home Sales Reinforces Recovery
- Renters Driven From Foreclosed Homes; While Cars Sales Skid
Article Author: Charles FeldmanCharles has written 179 articles for us.
Visit Charles's Website: http://www.thefeldmanblog.com
Charles is currently reporting for KNX Radio in Los Angeles, is the co-author of the book No Time To Think, and can be found commenting about the news on his blog, The Feldman Blog, as well as on The Huffington Post.
Joshua Dorkin
{ 4 comments… read them below or add one }
The news that we are hearing here in Canada, is that the real estate market in the USA is not going to recover any time soon. That is, not until there is a rally in job creation.
Best Regards,
Neil
Maybe I’m overly optimistic, but I agree with what the NAR’s chief economist said, that fewer sales could be signaling a reduction in inventory, which is a necessary first step to price stabilization and, eventually, price increases.
I agree on the jobs perspective. Small business are getting crushed right now and aren’t hiring. There is an opportunity for small recovery though in real estate despite the lack of job growth. Inventories are contracting, significantly in some markets. Here in Memphis the number of homes on the market is hovering around 10,000 from a peak of 16,000 in Nov 2007. Over-correction in many markets will lead to short term price increases.
I feel like the tax credit just caused volatility by accelerating sales which would happen eventually anyway. I’d be interested to hear what economists have to say about the psychology of the tax credit. Would be renters decide to become homeowners only because of a tax credit? I’m looking forward to seeing how the market stands on its own.
I don’ remember the numbers, but I read an article yesterday in which some economists calculated the amount of net new jobs that would have to be created in order to just lower unemployment by 1%. Needless to say, we are nowhere near creating jobs at that rate. So the jobs issue will continue to be a significant burden for a long time.