2007 October 24 Wednesday
Big Housing Market Drop In September

The two big problems weighing on the US economy at this point are the housing downturn and rising oil prices. The housing downturn is causing credit problems which has effects beyond the housing market. High oil prices cut into disposable income and create costs for businesses. But on the up side the declining dollar is boosting foreign demand for US goods. Hard to say whether the problems are big enough to push the US into a recession. But the housing market problem is getting even worse.

WASHINGTON, October 24, 2007 - Temporary problems in the mortgage market are easing and are expected to free some pent-up demand, but disrupted existing-home sales and distorted prices on sales closed in September, according to the National Association of Realtors®.  Even so, prices rose in the Northeast and Midwest.

Total existing-home sales – including single-family, townhomes, condominiums and co-ops – fell 8.0 percent to a seasonally adjusted annual rate1 of 5.04 million units in September from a downwardly revised pace of 5.48 million in August, and are 19.1 percent below the 6.23 million-unit level in September 2006.

Home construction is declining along with home sales.

October 17, 2007 - Nationwide housing starts declined 10.2 percent in September as builders focused on reducing their inventories in the midst of continuing mortgage market travails, according to data released by the U.S. Commerce Department today. The majority of the downward movement was centered in the multifamily sector, where a significant uptick in starts had been registered in the previous month.

Overall housing starts fell to a seasonally adjusted annual rate of 1.19 million units, the slowest since March 1993’s pace of 1.08 million units. Single-family production registered a 1.7 percent decline to a 963,000-unit rate, while multifamily production posted a 34.3 percent decline to a 228,000-unit rate.

The worse the news gets the more reluctant buyers become and the worse the news gets. Are we headed for a recession?

I'm most worried about signs of a credit crunch.

The US market for asset-backed commercial paper (ABCP) contracted a further $11bn last week as lenders refused to roll over short-term debt. This form of paper has shrunk by 25pc since August, cutting off almost $300bn of funding.

Dr Suki Man, an analyst at Société Générale, said "shutters" had gone up across the debt markets. "Has it just got ugly again? The jury's out, but it's enough to make one feel the chill. All this is offset by a US economy still expected to grow by more than 2pc, and China and India still growing at breakneck speed," he said.

If you are thinking of switching jobs choose a company that has growing exports.

Share |      By Randall Parker at 2007 October 24 07:55 PM  Economics Housing

JSBolton said at October 26, 2007 3:11 PM:

With house prices flat or declining pretty much everywhere in America, an immense pile of frauds is in process of being activated, which, if prices had continued rising probably would not have have been.

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