Housing Market Keeps Going Down
On December 28th the Commerce Department reported that home sales have gone down a steep 9% - which was more than what people were looking for. People were hoping that the number would drop at a more decreased rate.
New-home sales dropped by 19.3% in the Northeast, 27.6% in the Midwest, and 6.4% in the South. However, sales increased by 4% in the West. Over the last 12 months, new-home sales nationwide have tumbled by 34.4%, the biggest annual slide since early 1991, and stark evidence of the painful collapse of the once high-flying housing market.
The supply of homes for sale rose to 9.3 months’ worth from 8.8 (revised from 8.5). Whereas earlier sales and price data had suggested big price cuts by homebuilders were clearing inventory, this pattern has been reversed with the November data and revisions.
The housing market has been suffering through a severe slump following five years of record-breaking activity from 2001 through 2005. Sales turned weak as did prices. The boom-to-bust situation has increased dangers to the economy as a whole and has been especially hard on some homeowners.
Foreclosures have soared to record highs and probably will keep rising. A drop in home prices left some people stuck with balances on their mortgages that eclipsed the worth of their home. Other homebuyers were clobbered as low introductory rates on their mortgages jumped to much higher rates that they couldn’t afford. With credit now harder to get to finance a home purchase, the problems in housing have grown worse. Unsold homes have piled up, and the problems are expected to persist well into next year.