The big news of the day yesterday was the ongoing misery of the US housing market that seems to continually surprise and astound economist and journalists everywhere. July sales dropped a record 27% to their lowest pace in 15 years. Soft landing anyone?
“This is a worrisome report and while it reflects the volatility caused by the end of the (government home-buyer) tax credits, it also indicates a deterioration in the underlying trend for housing demand,” said Michelle Meyer, senior U.S. economist at Bank of America Merrill Lynch in New York.
“For the overall economy, the dangerous link to housing is home prices and this report signifies that home prices should fall considerably faster, which could tip the economy back into a recession. We are, however, not quite there yet but this is a worrisome report.”
With home sales tumbling, the inventory of previously owned homes for sale rose 2.5% to 3.98 million units from June, representing a supply of 12.5 months — the highest since at least 1999 and up from June’s 8.9 months.
The jump in the supply of homes was almost double the six to seven months’ supply considered to be a healthy level.
Last month foreclosed properties accounted for 22% of sales while short sales made up 10%. First-time buyers accounted for 38% of transactions, the lowest in 12 months.
The national median home price rose 0.7% from July last year to $182,600.