Today’s post will revisit our previous analysis of the housing sales surge to see if there’s cause for celebration yet…
Good news, everybody! Existing home sales soared in October 2009 to levels not seen since the 2007 bubble. Surely this shows that the alleged green shoots have blossomed into a veritable cornucopia of cash, just in time for Thanksgiving.
Not only did home sales jump 10.1% month-over-month, but they’re up a whopping 23.5% year-over-year! Twenty-three and a half percent! Holy cow!
But, er, prices are still down. 7.1%. Hm. Let’s not peer behind that curtain, right?
Or, perhaps we should. Remember our widgets example from before? Put this on a 10-year trajectory and you end up with increasing sales by over six-and-a-half times while only diminishing sales prices by half. And while that’s better than the pace of August’s figures, it’s a little disconcerting when we apply it to the actual home sales and prices.
Basically, this pace would lead to an October 2017 sales rate of 33 million existing homes at a median price around $96,000.
Yeah, that’s right. Thirty-three million homes. There are about 125 million homes in this country, so that would be a sales rate of over a quarter of all existing homes being sold every single year. For just over half of the current price of $173,000 apiece.
I reiterate, even if we take these inflated sales numbers (everyone acknowledges the tax credit is ballooning sales) seriously, the ultimate outcome of this pace is not recovery, but fire sale. As long as prices are continuing to deteriorate while sales figures rise, that demonstrates increasing weakness in the market, not strength.
At the point at which every fourth home in America is for sale, it doesn’t matter whether anyone is buying them or not. The writing would be on the wall that no one wants to live here anymore.
