As sales of real estate plunge still further, dipping to their lowest in 15 years, economists are speaking in hushed tones about an impending double dip in housing prices. It doesn’t take a rocket scientist to figure out that this will take a stranglehold on the economic recovery and slow it down still further. Home sales contracted by 27.2% in the month of July and this beat expert expectations by a huge margin, being twice the contraction that analysts had predicted. This drop coincides with the withdrawal of the $8000 homebuyer tax credit and it is without a doubt that this has greatly served to change sentiments on the topic of buying a house.
That credit was one of the few things that brought buyers to the vacant plots for sale and there was a mad rush to beat the April 30 deadline for buying houses and getting the benefit of it. Now, there is a lull after the storm and it is so calm that not a leaf is stirring. Home sales have flagged to 34% below the induced buying frenzy observed at the end of April, and it is painfully obvious to onlookers that there is a vicious cycle at play over here. The housing industry needs the economy to pick up, which will instill faith in buyers again. But the economy in turns needs a fillip from the real estate scene which is just not forthcoming. It is a classic Catch-22 situation that leaves everyone short-handed.
And with people beginning to brace for the double-dip, things will only get worse before they become any better once the facts hit home. Pick a home, any home, and chances are sales for their types are at an all time low since the figures first started to be assessed back in 99. Most single-family homes are the biggest movers in terms of the number of transactions they log and they are at an all-time low, lower than May 1995 when the nadir was previously achieved. There are currently just a little less than 4 million homes for sale (with 3.98 million up for grabs) and that is a 12 and a half month supply of homes for the market to consume, even at this snails pace. Six months inventory is considered par for the course, just so you know.
So it’s a combination of flagging demand and a flood of homes to choose from that have served to deflate prices of real estate. The wellbeing of the real estate scenario is closely tied in with the wellbeing and confidence of the nation at large and it does not bode well to see things falling away so rapidly. Let’s just hope Real Estate bounces back real soon.