Three Signs Housing’s Getting Weaker

by Jacob Goldstein

3-signs-housing-s-getting-weaker?sc=nl&cc=pmb-20100622

After bottoming out in the first half of ’09, the housing market made something of a comeback late last year.

The comeback was stoked in part by public subsidies for the housing market.

Now, key pieces of those subsidies are winding down — namely, the Fed’s purchase of more than $1 trillion in mortgages, and the Obama administration’s home-buyer tax credit, which paid people thousands of dollars to buy a house.

As those programs wind down, the housing market’s getting weaker. The latest sign of a softening market came today.

Here are three signs that the housing market is getting weaker:

1. Sales of previously-owned homes fell by 2.2 percent in May, the National Association of Realtors said today. Economists were predicting that sales would rise, driven by the tail end of the homebuyer tax credit.

2. Home builders’ confidence in the housing market fell this month, according to a monthly survey of the industry.

3. Home prices have been falling this year, according to the Case-Shiller index.

To qualify for the home-buyer tax credit, people had to sign a contract by April 30 and close by June 30. Programs like this often encourage people who are planning to buy a home to hurry up and do it before the program ends. In that way, they sometimes steal home-buyers from future months.

In a note this morning, Ian Shepherdson of High Frequency Economics argued that this phenomenon will lead to more weakness in the housing market in the coming months.

“The tax credit undoubtedly pulled into the spring transactions which would have taken place in the summer, so the next few months will be tough,” he wrote.

3 Responses

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  2. Right!

  3. What the hell is the Fed going to do with $1.5 trillion in worthless mortgage securities? Will they start foreclosing? I know they plan to sell them at highly discounted prices to par value. It seems that these securities do not have any interest in actual real property, only to income streams. So I guess the Fed cannot foreclose.

    What a deal. The trusts receive par value from the Fed, get rid of the junk, and still retain lien holder rights to foreclose. What a freaking scam!

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