2007 April 24 Tuesday
Housing Sales Turn Down Again

The rise in housing sales has reversed.

Growing problems in the mortgage industry combined with bad weather in some parts of the country to fuel the steepest one-month decline in sales of existing homes in nearly two decades, the National Association of Realtors reported yesterday. Sales of previously owned homes in March fell 8.4 percent from February, the group reported. It was the largest one-month drop since sales plummeted 12.6 percent in January 1989, when the country was in a housing recession. It was also 11.3 percent below the number of units sold in March 2006.

Will the retirement of the baby boomers cause a glut of housing as retiring people sell their bigger houses to downsize into retirement homes? If so, has this housing market bubble burst catalyzed an early arrival of a housing bear market? I'm skeptical about this because population growth seems like it works against a long decline in housing prices.

The supply of unsold homes is high compared to the rate at which homes are getting sold.

Also, many buyers might be waiting to see if prices will soften as foreclosure activity jumps and the inventory of unsold homes rise. Under current sales rates and inventory levels, it would take 8.7 months to deplete the supply of homes for sale. A year ago, it would have only taken 4.7 months, according to the association

The US Federal Reserve's position is that inflation is a greater threat. So the Fed isn't inclined to lower interest rates to compensate for the housing downturn.

Share |      By Randall Parker at 2007 April 24 11:25 PM  Economics Housing

Anon said at April 25, 2007 6:14 AM:

I was kind of hoping for a housing downturn. I had hoped that maybe a miracle would occur and real estate in northern NJ would become slightly more affordable for me. However, regardless of what happens in other areas of the nation, a housing downturn is highly unlikely to have an effect or even be noticed here. There is quite a bit of building going on, so maybe there will be a glut of property available. One can hope. Until then, I guess I'll just keep renting.

rtove said at April 27, 2007 1:14 PM:

unlike trade and savings, whether or not the economy will smoothly manage the boomer retirement is a real economic issue. demand/consumption declines with age. continued high demand is an important driver of productivity and progress. my own expectation is that the economy will manage the retirement and move forward, but it's worth looking at more closely. also, there are myriad micro industry issues involving demand changes, such as in housing.

m said at April 28, 2007 7:12 AM:

35mm black americans,36mm?+? hispanics and 77mm boomers all expecting an endless river of money and entitlements from Uncle Sugar.
We can't pay for all 3 and I doubt we can pay for 2 out of 3.
Now add in all our public and private debt to pay for a lifestyle we can't afford.
Japan and Europe have demographic disaters ahead and they will want back all that money they've been loaning us to pay for their old goats and minorities.

We can pay the debt or repudiate it,either way no more credit card lifestyle on foreign savings.

There are going to be big,and very P.O'd,losers among those groups.
Not to mention what happens when the younger,productive cohort are told they will have to accept a lower and declining standard of living while paying most of their income to Uncle.

And don't forget that war with the muzzie fundies.The left,and Europe, may think we can wish them away,that we can pretend we aren't at war with them,but they clearly are at war with us.

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