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U.S. Existing Home Sales Crash 27%, Treasury Bond Yields Hit New Lows

Housing-Market / US Housing Aug 24, 2010 - 12:01 PM GMT

By: Mike_Shedlock

Housing-Market

Best Financial Markets Analysis ArticleIn yet another clean sweep, the third in a week or so, sales of existing homes dropped twice as much as expected, worse than every economist forecast, to a 15 year low. Inventory soared to 12.5 month, the highest since 1999. Treasury yields plunged with yield on the 10-year note falling as low as 2.50 and the 2-year note hitting a new all-time low at .47%.


Please consider Sales of U.S. Existing Homes Drop More Than Forecast

Sales of U.S. previously owned homes plunged 27 percent in July, twice as much as forecast, evidence foreclosures and limited job growth are depressing the market.

Purchases plummeted to a 3.83 million annual pace, the lowest in a decade on record keeping and worse than the most pessimistic forecast of economists surveyed by Bloomberg News, figures from the National Association of Realtors showed today in Washington. Demand for single-family houses dropped to a 15- year low and the number of homes on the market swelled.

A tax credit of up to $8,000 boosted sales earlier in the year, pulling forward demand and indicating additional advances will prove difficult. Mortgage rates at record lows have provided scant relief to the industry as unemployment hovers close to 10 percent, foreclosures hold near record-highs and the economy cools.

“This is a devastating reading on the U.S. housing market,” said Derek Holt, an economist at Scotia Capital Inc. in Toronto. “There’s such an inventory overhang, it shows there will be pressure on prices” in the months ahead.

The pace of existing home sales is the slowest since comparable records began in 1999. Purchases of single-family homes dropped to a 3.37 million annual rate, the lowest since May 1995.

Range of Forecasts

Economists projected sales would fall 13 percent from June’s previously reported 5.37 million pace. The agents’ group revised the June sales figure down to 5.26 million. Estimates in the Bloomberg survey of 74 economists ranged from 3.96 million to 5.3 million. Previously owned homes make up about 90 percent of the market.

The number of previously owned homes on the market rose 2.5 percent to 3.98 million. At the current sales pace, it would take 12.5 months to sell those houses, the highest since at least 1999 and compared with 8.9 months in June. The months’ supply of single-family homes at 11.9 months was the highest since 1983, the NAR said.

Extend and Pretend

The only thing this administration knows how to do is extend and pretend. The latest gimmick offered on August 11, 2010 is HUD Offers Interest-Free Loans to Reduce Foreclosures.

The Obama administration will offer $1 billion in zero-interest loans to help homeowners who’ve lost income avoid foreclosure as part of $3 billion in additional aid targeting economically distressed areas.

The Department of Housing and Urban Development plans to make loans of as much as $50,000 for borrowers “in hard hit local areas” to make mortgage, tax and insurance payments for as long as two years, according to a statement released today. The Treasury Department will also provide as much as $2 billion in aid under an existing program for 17 states and the District of Columbia, according to the statement.

The initiatives will help “a broad group of struggling borrowers across the country and in doing so further contribute to the administration’s efforts to stabilize housing markets and communities,” Bill Apgar, HUD’s senior adviser for mortgage finance, said in the statement.

Fool's Offering vs. Free Rent

Anyone going $50,000 deeper in debt to "save" their existing underwater home is a complete fool. On the other hand, anyone who takes the cash as an offer for free rent with a plan to declare bankruptcy and walk-away later just may be thinking clearly.

Thus, it is likely that the fool in this case is the Obama administration. The only thing this stupid program will do is waste taxpayer money while pushing foreclosures into the future.

Meanwhile the number of negative surprises continues unabated.

Recent Surprises

Recession Never Ended

As I said in 3rd Quarter GDP Likely Negative, Recession Never Ended ...

While some people still think the odds of a double dip recession are close to zero, ironically, the only reason they may be right is if the first dip never ended.

Amazingly, economists are still clinging to estimates of 2.5% and up.

So expect to discover the vast majority of economists will be surprised at the forthcoming downward revisions, even after we point these things out well in advance and repeat them.

The ECRI is still touting the "flattening" of the Weekly Leading Indicators (WLI) at -10. With the collapse in treasury yields, a print of -500,000 on weekly claims, and a god-awful Philly Fed report, let's watch the next few weeks. I suspect this "flattening" period will soon be over.

Fooled By Stimulus

Nearly every economist has been Fooled by Stimulus even though the structural problems still remain.

It's time to face the facts: There never was a "recovery" by any rational measure. The alleged recovery was nothing more than inventory replenishment fueled by massive and unsustainable government spending waste with additional trillions of taxpayer dollars handed out in bank bailouts.

The plunge in existing home sales shows exactly what happens when free money handouts stop.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2010 Mike Shedlock, All Rights Reserved.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Steve
08 Sep 10, 11:44
Who is the fool?

Psalm 37:21: "The wicked borrows and does not repay"

Prov 19:1: "Better is the poor who walks in his integrity than one who is perverse in his lips, and is a fool"

Psalm 14:1: "The fool has said in his heart, 'There is no God'"

Prov 26:5: "Answer a fool according to his folly, lest he be wise in his own eyes".

When a person takes out a mortgage the bank agrees to give them a large sum of money, and they agree to pay it back over time. The banks may have been foolish, the price of the house may have gone down, but the borrower still has the house, the bank lived up to its side of the agreement, and the borrow must do so as well. To do otherwise is to lack integrity.

I am not counting those who can not - but those who choose not to. Even the godless know that two wrongs don't make a right. What would happen if everyone followed your advice?

I have enjoyed reading some of your articles in the past, Mish (trying to look past your boastful pride), but with advice such as the above, you are showing yourself to be a godless fool.

- Steve


Paul
08 Sep 10, 15:01
boastful pride

"Even the godless know that two wrongs don't make a right".

So tell us more about this boastful pride you appear to know so much about Steve?


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