Americans’ long infatuation with owning a home, which even the economic collapse of 2008 could not kill, stalled last month.
Housing sales in July plunged 25.5 per cent below the year-ago level, the National Association of Realtors said on Tuesday, as buyers lost the spur of a government tax credit. The steep descent put the volume of single-family home sales at the lowest level since 1995.
The financial markets took the news badly, with the Dow Jones industrial average closing down 134 points to a six-month low.
Mortgage rates are the lowest in modern memory while affordability, because of price declines of 30 per cent in many areas, is the highest in at least a decade. The government is allowing buyers to put only a token amount down, guarantees lenders against default and regularly issues proclamations that the worst is over.
Apparently, all of that is not enough to put a floor under housing. With unemployment steady at more than 9 per cent, and with millions heavily in debt, many potential buyers are lost to the market.
No region was immune in July, with sales in the Northeast dropping 30 per cent, the Midwest falling by a third, the South down 20 per cent and the West off 23 per cent.
The report “shows that there’s a lot more work to do,” said Bill Burton, deputy press secretary, the White House, at a briefing on Martha’s Vineyard, where President Obama is vacationing.
Real estate helped drive the slump, and the question now is how much it will drag down other parts of the fragile recovery.
The turmoil in housing, which is likely to lead to further price declines this winter, could send growth in the second half of the year below 1 per cent, said Joel L. Naroff, an economist. “It won’t be a double-dip recession but it might feel like it,” he said.
Over the last 20 years, sales of existing homes have averaged about 4.9 million a year. The sales volume in July equates to an annual rate of 3.83 million.
Experts think prices will fall another 5 to 10 per cent this winter.