July 25, 2009
The Great Recession and the Housing Market
Existing home sales were up 3.6 percent in June, while condo sales surged 14.0 percent. This has been the longest string of sales increases since 2004, quite a healthy upturn. Foreclosures too are looking less grim. According to NAR, distressed sales were 31% of total sales in June, declining from the 45 % to 50% earlier in the year.
We are beginning to absorb supply. Housing inventory continues to trend down, declining 15.0 percent from June 08. There is an expected new wave of foreclosures and many say it will get worse before it really begins to subside, but we seem to be in a better position to absorb inventory than before.
The housing market is showing clear signs of stabilization. The Federal Housing Finance Agency Purchase Only House Price Index rose .09% for the third month in a row. The price trend is still not positive, but reflects a decline in the downtrend.
Bernanke testified that better conditions in financial markets have seen improvements in consumer spending and the decline in housing activity has moderated. Moody's Economy.com notes that Household credit conditions should improve significantly by this time next year, based on a study of 7.5 million credit files from Equifax.
The Feds Term Auction Facilities, which loan money to banks, is reducing its auction from 125 billion to 100 billion, big banks are in better shape.
The Feds Bernanke expects positive growth in the second half of this year. Unemployment will continue to rise even as the recovery takes hold. As long as 70% of the economy is consumer based and we have a weak consumer ours is a long and fragile recovery. In the 2001 recession, unemployment did not peak until 18 months after the recession ended.
The Conference Board’s Index of Leading Indicators called the start of the this recession and its now signaling the end of a 22 month recession. If we did avoid the Great Depression, we did not avoid the Great Recession.
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Posted by Howard at Saturday, July 25, 2009