Existing home sales fell more than forecast by 8.6% in the month of November. Purchases of new homes fell 2.9% in the same period and both reports show record price declines over the past year. This news has sent the markets lower, once again demonstrating how difficult it is for the market to make headway in the face of a constant stream of negative economic data. I would actually contend that the markets are divergent from the data in the fact they have held up for the past 3 months. I believe that to be a technical condition that will not last.
NAR and other “sales” oriented people (almost everyone now in our economy) have been saying over and over how this is going to turn around and that demand is “pent up.” I’ve been saying all along that the only pent up demand is that of the sellers who would like to sell but can’t. Thus, I believe that the trend in housing will continue as there is a “shadow” inventory that is just waiting to list at the first sign of stability. I also note that this phenomenon is putting a damper on job mobility. Those who may have sold in the go, go days of real estate are now maybe stuck and thus their mobility is limited.
I have been expecting that some of the major homebuilders would fail outright, and while some of the mid-tier builders have gone out of business, the very largest have not. I believe that will change once we get into wave ‘C’ down, that’s where the businesses who are hanging on and “hoping” will be forced to concede defeat. Their credit long since cutoff, it’s only a matter of time.