Existing Home Sales in U.S. Slump; Prices Drop to Lowest Since April 2002

[Purveyor]

Source: Bloomberg

By Alex Kowalski

March 21 (Bloomberg) -- Sales of U.S. previously owned homes dropped more than forecast in February and the median purchase price declined to the lowest since April 2002, indicating the housing market is struggling to recover.

Purchases decreased 9.6 percent to a 4.88 million annual rate, less than the 5.13 million median forecast of economists surveyed by Bloomberg News, figures from the National Association of Realtors showed today in Washington. The median price declined 5.2 percent from a year earlier, and 39 percent of the sales were distressed properties.

Foreclosures are adding to the glut of distressed properties and pressuring prices, leaving some Americans with bigger mortgages than their homes are worth as joblessness hovers near 9 percent. The figures underscore the Federal Reserve’s view that the housing market “continues to be depressed” even as the rest of the economy improves.

“The demand for housing just isn’t there,” said Mark Vitner, senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “We have to clear this inventory of foreclosures. We think that happens in the second half of the year.”

Read more: http://noir.bloomberg.com/apps/news?pid=20601068&sid=aLINcZnHuw3E

[bluestateguy]

1. Lower house prices mean more affordability for more people

This is largely making up for the era when people were using their homes as ATM machines to finance new boats, their kids' weddings and other risky investment schemes.

[Fuddnik]

2. It's probably going to get a lot more "affordable".

[Raschel]

14. Oh I agree. I think home prices will drop to what they were before they skyrocketed.

When was that, around 1995?

Then add to that the absence of labor jobs and jobs paying around $12 an hour.

How will people be able to afford a home on those wages?

[InkAddict]

3. but, but, but where are the jobs?

and the confidence to throw away a sagging dollar on a 15- or 30-year mortgage?????

[No Elephants]

7. Ah, yes, keep blaming it on homeowners, not government or investment bankers or rating agencies,

or mortgage lenders, or appraisers or everyone else who profited from inflating real estate and selling derivatives "backed" by risky mortgages.

Nope.

Damn all those kindergarten teachers and roofing workers who took advantage of repeal of Glass Steagall to make themselves rich by taking out a second mortgage that their theretofore conservative bankers were assuring them they could afford.

(typo edits)

[David__77]

16. Glass Steagall should be reinstituted immediately.

This isn't a moral blame game. The economy must be restored.

[defendandprotect]

19. Don't Teachers run Wall Street -- and Nuclear Power Industry?

[brentspeak]

10. Who knew that Larry Kudlow posted on DU?

[bluestateguy]

11. Larry Kudlow would have been cheering on the real estate bubble

I was not.

[fasttense]

18. How did I miss that era????

I bought a home in 2002 and yet no house ATM for a new boat, kid's wedding or a risky investment scheme. How could I have missed all that free money? And none of my neighbors were buying new boats, fancy weddings or investment schemes because all their houses are up for foreclosure sales.

Nope, the only thing I saw was watch your house value plummet era. The value you hoped would help support your retirement. The value that went into some bankster's pocket book.

I am just so thrilled to know that my retirement house value is dropping so someone else can buy it for half it's value. Whoopee, happy times are here again for those who didn't lose their jobs and couldn't find another cause all the jobs were shipped to India. Gee how wonderful for some one else.

Not so good for the rest of us though.

[ladywnch]

4. until there are good paying jobs available there won't be any demand for houses. n/t

[on point]

5. Lower wages means housing prices must fall too!

It is inevitable.

The whole idea of propping up housing prices was an economic fantasy. A waste of money to save the banks, not the people. (Sorry to those people underwater) Housing prices are never going to come back if people can't afford them. The basic rule of thumb is that people should pay no more than 30% of their income. They were paying more before the recent recession. Now that wages have dropped, the house prices must drop too.

Loose money in supply side economics fraud from Greenspan and neo cons simply created a asset price inflation, which just popped, and will eventually end up in currency inflation, which we are just starting to see. Now the wealthy are busy buying up extra houses as an investment, since they have cash and the rest of us can't get loans. They think they can sell them later, or rent them.

This means people may be driven back into times when they rented tenements and lived many people crammed together, or the wealthy will loose their shirts, or the wages will have to come up.

If people in the USA are going to be paid the wages of third world countries, then the prices of the assets they buy are going to have to be priced equivalent.

[Yavin4]

9. [phone]

A very well done post. You'd be amazed at the resistance that it will engender.

[LiberalEsto]

6. We're going to need to start digging burrows

to provide housing

[Yavin4]

8. Well, With Republican Governors Waging War Against State and Local Workers

laying them off and requiring them to pay more for their healthcare and pension, all that does is decrease the number of potential buyers for houses.

[pansypoo53219]

12. you can't re-inflate a balloon that is popped.

this has been a gond thing where prices had gotten insane. mailmen need houses too. but we also need to bring rentals back. and less push on building new and fix the existing.

[karynnj]

13. Could the fact that the sales included 39% distressed properties

explain the drop in prices?

What is concerning is that the number of sales fell. (It sounds like they are saying that many people can not buy because they are stuck where they are - which given the % under water makes sense.)

[Godhumor]

17. Distressed property sales have been high for awhile now, but, yes, it is a factor

The other issue, and one not well touched on, is that rates are beginning to climb again, so there is pressure coming from that end as well.

Housing is still a mess and will be until distressed properties start dwindling, which will require mortgage stability. The analyst estimate of second half of the year is probably correct, but if we get past 3rd quarter without a change...well, winter is not traditionally a time of lots of house buying.

Other thing to look at is cash purchases. That number as an absolute percentage needs to begin decreasing as well(You want to see a higher mortgage % of total sales as an indicator in trust in the market).

[ClarkUSA]

15. The terrible winter weather has increased the downward trend of those numbers.

In my area, we got nearly 90 inches of snow. Hell, it's snowing now! Plus there's more snow is in the forecast for later this week.

There were 7-8 blizzards in a row starting the first weekend in January in most regions of the Northeast. The Midwest and West didn't fare much better. Even the South was hit by freezing weather and some snow showers for all of January and most of February.

Who wants to look at houses trudging through snow and bitter weather? Not me, and I am in a position to buy. I would've have looked at homes in my region but realtors suggested I wait. Not that they had to tell me that. Soon, it'll be mud season. I'm not holding my breath. I'd rather wait until the sun is shining and the ground is dry.

I'd like to see what the numbers look like in June.

[DJ13]

20. Since wages have been stagnant for 30 years, the prices will come down further

How much were houses selling for in 1980 (adjusted for inflation, of course) ?