In yesterday’s post on the “Implications Of Household Debt Deleveraging” we outlined the fact that the consumer is working their way through a debt deleveraging cycle. In other words, the last 30 years of Keynesian economic policy has led to the culmination of malinvestment that consumers are now struggling with.
Not surprising existing home sales for May fell to 4.81 million units which is now resuming it’s downtrend after brief upticks that were caused by government incentive programs that dragged forward future existing home sales. As the consumer has begun to deleverage their household balance sheet both new and existing home sales have decreased. High unemployment, concerns about current employment, stagnant wage growth and uncertainty about future economic conditions weigh on the consumptive attitudes of the consumer.
Year over year the rate of existing home sales has declined to a negative 15.3% from April’s negative 13.8%. Supply on the market, at 3.72 million, is falling but not enough relative to the decline in sales as months supply rose to 9.3 months vs April’s 9.0 months. This supply of existing homes has a broad range of effects on the housing market as it also dampens new home sales as prices of existing homes are lowered to get them sold.
The other ominous cloud for the housing market is the huge inventory of existing homes that are currently delinquent or in the stalled process of foreclosure. As these homes ultimately hit the market not only will that drive existing home prices lower it will create a further fallout of strategic defaults by homeowners that give up hope of ever getting back to even on their properties.
The NAR believes, and continues to hope, that May will prove to be the year’s bottom for the housing sector. They will be wrong as they were last year as well, oh, and the year before as the balance sheet recession continues and consumers hunker down to regain stability in a weak economic environment that will continue to plague the housing market for some time to come.