Even with the first-time home buyer credit of $8,000 sales have tanked. The problem is two-fold. First, millions of Americans are holding off on making such major financial moves in this horrible economy. They are unsure of their job security, unsure if their taxes will increase and unsure if home values will continue drop – all valid reasons for holding off. Second, it is very difficult – some might say next to impossible – to qualify for a mortgage these days. The banks have gone from one extreme where anything goes to another where middle class Americans are being shut out of the housing market due to unrealistic debt to income ratio requirements, limits on investment accounts such as 401Ks for reserves and stringent new rules with regards to credit scores. Add all of the above to the fact that millions remain unemployed and there you have it.
The Commerce Department reported Wednesday that new home sales dropped 11.2 percent last month to a seasonally adjusted annual sales pace of 309,000 units, the lowest level on records going back nearly a half century. The big drop was a surprise to economists who had expected sales would rise about 5 percent over December’s pace.
While winter storms were partly to blame, home sales have fallen for three straight months despite sweeping government support. Economists were already worried that an improvement in sales in the second half of last year could falter as various government support programs are withdrawn.
“There is no doubt that January and February are going to be messy months for housing, given the severe weather conditions, but that doesn’t take away from the fact that the housing sector has taken another big step back, even with the government aid,” Jennifer Lee, a senior economist at BMO Capital Markets, said in a research note.
January’s weakness was evident in all regions except the Midwest, where sales posted a 2.1 percent increase. Sales were down 35 percent in the Northeast, 12 percent in the West and almost 10 percent in the South.
The drop in sales pushed the median sales price down to $203.500. That was down 5.6 percent from December’s median sales price of $215,600, and off 2.4 percent from year-ago prices.
But keep on working on health care, Barry – because that is so vital to the economy.