The National Association of Realtors came out with their August home sales figures and showed some major issues.
Not only are sales of existing homes down, but the inventory is up to a 7.5 month supply. I think Kate at Out in Left Field could personally vouch for the fact that homes are not selling – but the numbers provide a stark reality.
This is the first month that showed a drop in prices since 1995, and only the six month-to-month drop in prices in the last thirty years. So it appears that not only are existing homes staying on the market longer, the price of those that are selling is down. Moreover, the economist for the NAR was reported to have said that prices will continue to fall for the rest of the year.
This is taken from a release from the NAR:
“For the past five years, the housing market has been a steadfast leader in the U.S. economy,” Thomas M. Stevens, president of NAR, told the Senate Subcommittee on Housing and Transportation and the Senate Subcommittee on Economic Policy. “After five years of outstanding growth, the housing market is undergoing a period of adjustment and becoming more and more of a balanced market between buyers and sellers,” said Stevens.
Stevens said that with the falling demand and increased supply, home prices still realized slight appreciation though it was less than 1 percent, where over the past few years homes were appreciating at double-digit rates. “While recent developments raise concern, it is important to remember that the housing market varies significantly across the country,” said Stevens. One-third of the country (by population) is still seeing rising home prices, including Alaska, New Mexico, Vermont and many states in the South, excluding Florida. States that experienced the greatest increases in home prices in recent years are experiencing significantly lower sales, such as Arizona, California, Florida, Nevada and Virginia.
So what does this mean? Well, in an earlier post here, we speculated the effects on both sides:
For home owners: Mortgage payments are going up for those who didn’t get a low-interest, fixed-rate mortgage… for some they are going way up. Property values mean higher taxes on newly-purchased homes. Insruance crisis means higher property insurance premiums. That means more money out of their pocket.
For potential home buyers: Houses are available, but insurance policies may not be. Most insurance companies are not writing new policies. Because of the Save Our Homes amendment, the value of most homes appraised by the property appraisers office are way below market value; that will be corrected in a big way for the new owner. If the new owner can find insurance, their mortgages will be more expensive.
Now add the fact that home owners who face tough economic times, from being “mortgage poor,” could be further hurt by an inability to get out of their house at a price that allows them a financial gain. This is just another way people can be trapped in their homes.
How widespread will the problem be? Will Florida’s growth rate help deflect some of the negative problems? There are certainly ramifications that we can expect to see. The drop in oil prices, and the Federal Reserve Board holding steady on interest rates will moderate these effects.
Only time will tell what the long term effects can be. But we know one effect: Kate is still teaching here, instead of moving to Colorado.