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Housing market's woes could get even worse No end in sight as home prices, sales plunge; falling rates might not help
The collapse of the housing market showed no signs of easing in November as sales of new and existing homes plunged and prices took their biggest hit on record. Despite aggressive government efforts to lower mortgage rates, other forces appear to be weighing on the market and prolonging one of the nation's deepest housing downturns ever. As the housing-led recession deepens, job loss worries have pushed many potential buyers out of the market. And the relentless pace of foreclosures increases the glut of unsold homes and pushes prices lower, as lenders price them aggressively to get them off their books. "I've never seen a broad-based falloff in home sales like this in tracking the market in 24 years," said Thomas Lawler, who follows the housing market at Lawler Economic and Housing Consulting. "It's just horrendous." Sales of existing homes fell 8.6 percent, far more than the 1.6 percent drop expected, to an annual rate of 4.49 million in November - the slowest pace in more than 17 years. The median sales price fell by 13.2 percent from a year ago, the largest in the 40 years records have been kept, to $181,300. The price drop was probably the largest since the Great Depression, said Lawrence Yun, chief economist for the National Association of Realtors. The steep drop in prices, combined with a recent plunge in mortgage rates, has made housing more affordable than it's been in years. But those forces so far have not been powerful enough to spark a housing rebound. "The real problem, to me, is the employment outlook for a lot of these would-be home buyers sitting there questioning whether or not they want to commit given the uncertainty in the economic environment," said Steve Ricchiuto, chief economist at Mizuho Securities. "And whether they will continue to have their jobs or even if their spouses will continue to have their job going forward." The job market shows little sign of improving soon. In a separate report, the Commerce Department Tuesday confirmed that the nation's gross domestic product shrank by a half-percent in the third quarter. Private forecasters such as IHS Global Insight estimate that GDP will fall at a 6 percent rate in the current quarter and 4 percent in the first quarter of 2009, with a smaller contraction coming in the second quarter. "(The economy) will get a lot worse before it gets better," said Nariman Behravesh, chief economist at IHS Global Insight. "Assuming that the incoming Obama administration does enact an $850 billion fiscal stimulus package quickly, it will do little to stop real GDP growth from dropping like a stone in the first half of 2009, but could help to turn things around in the second half and provide a basis for sustained growth in 2010." "That's a big issue right now - getting the 4.5 percent (mortgage) rate that's out there," said David Goldberg, a housing industry analyst at UBS. "You have to have pristine credit, and not that many buyers do in terms of the marginal buyer who needs to come into the market. That's a big problem for builders right now." Home builders have slashed the pace of housing starts, and construction has slowed to a crawl. Yet the inventory of unsold homes remains at historic highs as lenders dump more foreclosed homes on the market. More than a year of public and private efforts to help keep people in their homes still hasn't slowed the pace of foreclosures. |
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