That was over fast. Hope it was good for you. The first-time buyer tax credit fumes couldn’t keep sales of existing houses from falling nationally a larger-than-expected 2.2 percent in May. So will the housing market continue to rattle along the bottom or does it face a double-dip sectoral recession?
Celia Chin of Moody’s Economy.com urges caution in jumping to conclusions; the monthly data can be volatile. “The fact that pending home sales have been trending upward suggests that perhaps closings are taking longer than expected,” according to Chin. “Learning from their mistakes earlier in the decade, mortgage lenders are carefully processing applications, making sure that all the i’s are dotted and t’s crossed. Still-tight lending is slowing the approval process, and this may also be slowing the flow of home sales that are closing.”
Still, several factors keep housing in a vicious cycle: High unemployment, lower incomes, underwater owners and the large “shadow inventory” of houses in much of the country.
A comeback of sorts might not provide much relief. Housing tied to easy credit and securitization of mortgages became the key driver of the economy in the past decade. That’s over. Now even a “new normal” will be extremely painful. House owners won’t have the equity wealth they temporarily enjoyed. Housing-related jobs will be fewer. Major builders and developers will be leaner. Credit will be harder to come by, and America remains over-leveraged.
How this plays out in the Seattle area remains to be seen. Most of the region avoided the overbuilding that plagued the Sun Belt. But we also arrived late to the recession, so many of its consequences are still coming through the pipeline.
Today’s Econ Haiku:
A British invasion here