Record Drop in U.S. Home Sales

Housing-Market / US Housing
Aug 27, 2010 - 02:14 AM

By: Barry_Grey

Sales of existing US homes in July plunged by a record 27.2 percent from the previous month, according to a report released Tuesday by the National Association of Realtors.

The virtual collapse in home sales affected every region of the country and was more than twice as bad as anticipated by economic analysts, who had forecast a drop of 12.1 percent. Sales fell to 3.83 million units, compared to June’s downwardly revised figure of 5.26 million.

On a year-over-year basis, existing home sales in July were down 25.5 percent from an annual rate of 5.14 million units in July 2009.

The July figure was the largest monthly drop since records began in 1968. It brought the rate of US home sales on an annualized basis to the lowest level since 1995.

Home sales fell 29.5 percent in the Northeast, 22.6 percent in the South, 25 percent in the West and 35 percent in the Midwest. The link between the housing collapse and the social distress caused by long-term mass unemployment was underscored by two pieces of data: nearly a third of the homes sold were distressed properties, and sales tumbled particularly sharply for homes in the lower to mid-priced ranges. In the Midwest, sales of homes priced between $100,000 and $250,000 plunged nearly 47 percent.

The July figure marked the third consecutive monthly decline since the April 30 expiration of a federal tax credit for home-buyers. The impact of the termination of the tax credit on the housing market has been compounded by the soaring number of foreclosed homes and the rising rate of mortgage payment delinquency.

Home foreclosures are running about ten times higher than before the housing bust of 2007. A survey released last week by Deutsche Bank showed that the rate of serious mortgage payment delinquency (more than 90 days) in the average US congressional district has nearly tripled from the time of the 2008 election.

The realtors’ report also recorded a sharp rise in the inventory of unsold existing homes in July. At the end of the month, 3.98 million homes were available for sale, which translates into a 12.5-month supply, up from 8.9 months in June and the highest level in over a decade. A six-month supply of available homes is considered a healthy level.

The disastrous home sales report is consistent with dismal reports last week on housing starts and new housing permits and other data, including a nine-month high for initial jobless benefit claims, which reflect a sharp contraction in economic growth and point to a further rise in unemployment, already near Depression levels.

Most economists believe that when the Commerce Department issues its revised estimate for second quarter US economic growth on Friday, it will downgrade the figure from the 2.4 percent it reported last month to 1.3 percent. Even this grim prediction may be overly optimistic. For the past several weeks, virtually every economic indicator has been worse than economists’ forecasts.

Dan Greenhaus, chief economic strategist for Miller Tabak & Co., spoke in a research note Tuesday of a “near, if not outright, collapse in housing.â€