3Q 2011 New Home Sales - March through August are typically the peak
buying months. But this time, Americans bought fewer new homes in that
stretch than in any other six-month period since record-keeping began a
half-century ago. And sales of previously occupied homes didn't fare
much better. They nearly matched 2009's total for the peak buying
months. And that was the worst since 1997.
Combined, total sales this spring and summer were the weakest on records dating to 1963. The figures underscore how badly the housing market is faring and suggest that a recovery is years away.
Because the economy is barely growing and unemployment exceeds 9 percent, many people see a home purchase as too big a risk. Some worry about losing their jobs. Others can't afford the 20 percent down payment that most lenders now require.
Not even shrunken home prices and the lowest mortgage rates in six decades are convincing would-be buyers.
"The job engine has really sputtered out, and without jobs, Americans really can't purchase homes," said Celia Chen, a housing economist at Moody's Analytics.
Plunging stock prices and renewed recession fears have led many economists to push back expectations for a housing recovery.
Chen expects prices to bottom at the start of 2012. And she doesn't expect sales and prices to make a healthy recovery until 2015 at the earliest. In hard-hit areas such as California and Florida, it could take decades for prices to return to normal, she said.
Pierre Ellis, an analyst at Decision Economics, said that until wages increase and hiring picks up, sales will languish.
The "bad news is the evident absence of optimism that sales will pick up to any degree," Ellis said.
Roughly 168,000 new homes were sold from March through August, the Commerce Department said Monday. That's fewer than the 180,000 for the same period last year -- and last year's sales were boosted by a temporary buyer's tax credit. Over the same period in 2009, roughly 208,000 new homes were sold.
In a healthy six-month buying season, about 400,000 new homes would sell.
Among re-sales, about 2.8 million homes sold from March through August this year. That's roughly as many as in the same periods in 2009 and 2010. In a healthy market, about 3.3 million would be sold in that six-month stretch.
Michael McGrew, who runs McGrew Real Estate in Lawrence, Kan., said many families won't buy until the economy strengthens. Even in Lawrence, which had a low unemployment rate of 6.4 percent in July and is home to the University of Kansas, people are worried, McGrew said.
What would help most would be a relocated company that's ready to hire in the Lawrence area, McGrew says. But hopes for the housing market to turn around soon are dim, he said.
"We're actually seeing more people trading down their home or trading out of our market entirely," McGrew said.
Nationally, prices are still falling. Prices for previously occupied homes have sunk more than 5 percent over the past year to a median of $168,300. New-home prices have fallen even further, by 7.7 percent, to $209,100.
That suggests builders and Realtors are slashing prices to compete with low-priced foreclosures and short sales. Short sales occur when lenders allow homes to be sold for less than what's owed on the mortgage.
Combined, foreclosures and short sales are selling at an average 20 percent discount. And they're lowering neighboring home values.
Devan MacConnell, 28, an administrator at a nonprofit in southeast Virginia, had been renting for years before buying a short sale this month -- a one-bedroom condo in Virginia Beach overlooking the ocean. She picked it up for $215,000, about $35,000 less than neighboring apartments.