Worrying Housing Data
This week, the National Association of Realtors announced that home sales in July slumped 27 percent to a 15-year low. The annual pace of sales for existing homes fell to 3.83 million, the lowest rate since May 1995. The housing group also revised sales for June lower. The severe drop in July sales was double what economist expected: They thought the withdrawal of the Obama administration’s homebuyers’ tax credits might push sales down 13 percent.
On top of that, the Commerce Department said sales of new single-family houses dropped 12.4 percent between June and July. That makes July sales — of 276,000 houses — the lowest level in the 47 years the Commerce Department has kept the data. Most economists expected sales to rise to 334,000 homes.
The two reports ginned up fears that the United States might be headed for a second leg down for housing — many economists see prices continuing to fall again, nationally — and even a double-dip recession. The New York Stock Exchange plummeted, as did indexes in Europe. Oil prices fell.
But what do poor home sales have to do with a double dip? A lot. For one, housing makes up a huge part of the U.S. economy. If realtors and homebuilders and mortgage brokers and other associated businesses are ailing, a lot of the economy is ailing. Additionally, falling home prices can be catastrophic for homeowners. They mean that more people cannot sell their homes — hurting housing-related businesses, and meaning less labor mobility. A reader of Andrew Sullivan’s blog demonstrates how:
I lost my job in May. I finally got an interview with an out of state firm last week. The thought of moving my family across the country was hard enough to consider. They made me an offer. It would be a cut over my last job but still it would provide health insurance – heck they even would chip in on living expenses. Talked to my real estate agent today. We are under water by about twelve thousand. My choices are stay unemployed or walk away from the house. I have till tomorrow to make this choice.