Inquiring minds are looking a bit amusedly at MarketWatch.com’s article “Why nobody wants to buy a house“. Why smile at an article about such a sad subject? Maybe it has to do with the tagline (what used to be called a ‘sub-title’):
Commentary: With government bribe money gone, so is any sane demand
That is refreshing. And the opening paragraph is almost as good:
Oh, sure, a lot of gullible first-time buyers got lured into the market over the last 18 months to take advantage of an $8,000 federal tax credit (not realizing how little difference that money will make when the first property-tax bill hits at the same time the roof springs a pesky leak and the city hits you with a special assessment for sidewalk repair). But that tax credit has expired — and, with it, any semblance of demand for homes.
The “What, why, how” of July:
The July data on existing-home sales show just how much the tax credit skewed the housing market in the months it was in effect. Sales plunged 27.2%, the biggest one-month drop on record, and inventories of unsold homes jumped to 4 million, a 12.5-month supply at the current sales pace, the worst level that measure has seen in at least 11 years. Read more on the plunge in existing-home sales.
Because of the original timing of the tax credit — you had to sign a contract on a house by April 30 and close by June 30 (the closing deadline was later extended to Sept. 30) — it was obvious that sales would get an artificial boost in June as buyers rushed to beat the deadline (since existing-home sales are reported once they close, not at the contract signing). And, by extension, there would be a big drop in July.
And will come in August?
Don’t think, though, that July is a one-month aberration. Sure, the numbers are record-breakingly bad, and August isn’t likely to see any such extremes. But August isn’t likely to show any increase in activity, either. And don’t hold your breath for September. Or October, November, December. In fact, don’t hold your breath at all waiting for a rebound in housing because all you’ll do is turn blue and suffocate.
Nobody wants to buy a house because in order to buy a house you have to have some bit of confidence in the future. And today there isn’t much confidence in anything that has to do with the economy.
Forget about talk that another big drop in housing prices is needed to spur demand. Prices have already fallen 25% or more from their peak in many areas as distressed sales made an outsize impact in the market. That demand, too, has been slaked.
Look out below!!!
We are off the cliff and on the express route down.
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