How Low Can You Go, U.S. Home Sales?

News on the home sales front this week was not good. July sales of existing homes dropped 27.2 percent from the previous month to 3.83 million units and new home sales fell to a 47-year low of 276,000, down 12.4 percent from June. New home sales were also off 32.4 percent from July 2009 figures, and existing home sales drooped 25.5 percent form the year before.

Prices for both new and existing homes decreased in July, with the median new home price across the nation falling to $253,300, the lowest price since 2003. Existing homes slouched down to $182,600 from $183,700.

Ouch. Of course the end of the federal tax credit is still running its course. Yet according to the National Association of Realtors, the group reporting the existing home data, things are not all bad.

“Consumers rationally jumped into the market before the deadline for the home buyer tax credit expired. Since May, after the deadline, contract signings have been notably lower and a pause period for home sales is likely to last through September,” said Lawrence Yun, NAR chief economist. “However, given the rock-bottom mortgage interest rates and historically high housing affordability conditions, the pace of a sales recovery could pick up quickly, provided the economy consistently adds jobs.”

But the economy has not consistently been adding jobs and consumer confidence remains weak. Notwithstanding the crazy low interest rates, mortgage applications fell dramatically between April and July and only showed a few signs of life throughout July and August. Economists say that the housing market typically leads the economy out of recessions but I’m guessing that until the unemployment rate starts to really show some turn-around, home sales are not going to make a strong comeback.