We expected the news to be bad, but this is really bad.
New homes were at a record low in May as buyers fled the market following expiration of the tax credit, down 33 percent from April (which itself was revised downward.)
This is why anyone with any sense (including me!) argued against the extension after it expired last time. We moved demand forward, artificially inflated prices and set ourselves up for another dip in home prices. Couple these declining sales with the rise in inventory as more sellers flood the market, and it's going to be ugly, probably for the rest of the year.
Once again it just points to the trouble builders are going to be facing, and that's going to trickle down to remodelers as well. Typically, the housing sector leads us out of a recession. That's clearly not going to happen here, which could be very bad news for all of us.
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I'll have to admit that I advocated extending the deadline through the spring. It had worked in the past, it appeared to be helping and I thought that it would give the housing market a bridge to the normally robust spring and summer selling season. But there are so many other factors at play here -- unemployment, the lack of access to mortgages (as well as AD&C financing), the appraisal problems, the failure of the administration's mortgage assistance program -- a tax credit isn't going to help. And now Congress is talking about extending it again, something that I was told categorically -- by the bill's sponsor, no less -- would not happen. I'm starting to think that housing will go through a fundamental change in this country, and probably not in ways that many of us would prefer.
ReplyDeletePat -
ReplyDeleteThanks for the comment. I totally agree with your last point. I've thought for the last couple of years that we are the verge of a massive change in the housing market and most people just don't realize it.
People have been burned by this crash and the idea of housing as an "investment" has been destroyed. A lot of people who were homeowners will never return to the market, and some of the experts I've talked to seem to think that this will also radically shape the way Millenials look at housing and keep them from investing in it to the great extent Boomers and Xers did.