Last month, according to the U.S. National Association of Realtors, the median price of an existing U.S. home sold in August fell 1.7% below the price in August 2005. That’s the first time in twelve years the median price of a U.S. home has fallen over a 12- month period.
The current inventory of unsold used U.S. homes sits at the highest level since April 1993. The one year price drop of 1.7% is the second sharpest drop in 38 years.
The drop in price for U.S. condominiums was more devastating. The average price of existing U.S. condo fell 2.4% in August 2006 from a year earlier.
It’s been five months in a row now that the sales of existing homes have declined. Meanwhile, the confidence level of new home builders (according to the U.S. National Association of Home Builders) has fallen to the lowest level in 15 years.
All the while, big cap stocks continue moving higher… as if the breakdown in the housing market is not happening. The big focus of the market and investors seems to be the expectation of lower rates ahead. What a great story courtesy of Wall Street. Can anyone say bear market trap?
When home prices fall, consumers simply feel they are worth less. And when you feel your net worth is declining you tend to spend less, low rates or not.
Any way you look at it, the housing market looks as though it’s headed for a hard landing and not a soft landing. The ramifications for consumers, realtors, home builders, mortgage companies, and the economy could be huge. But the stock market is telling us that we don’t have to worry. Big cap stocks are rising in price and that means everything is okay. I hope my PROFIT CONFIDENTIAL readers don’t buy it.