Housing Sales Are Back to Trend

Both the NYT and USA Today have convinced themselves that house sales are well below their trend level, with the latter telling us that a 5.5 million annual sales rate of existing homes considered healthy. In fact, we are pretty much back to trend levels of sales. In the mid-90s before the bubble began to distort the market, sales averaged about 3.5 million a year. A simple adjustment for the 15 percent population growth over this period would imply an annual sales rate of 4 million existing homes. That is somewhat below the current 4.5 million sales rate.

The gap between the current sales rate and the trend more than makes up for the continued weakness in new home sales. So, what are these folks talking about?

Geithner Comment
written by Ron Alley, August 24, 2012 8:20

I surely am not a Geighner fan, but this quote strikes me as being spot on:

"The whole foreclosure crisis across the country now is really driven by what happened to unemployment and what happened to the income of Americans. The best things we can do now to help mitigate that risk is to help get the economy. growing again, bring unemployment down as quickly as we can, put people back to work."

/www.gpo.gov/fdsys/pkg/CHRG-111shrg55245/pdf/CHRG-111shrg55245.pdf

Geithner's views on the foreclosure crisis were shared by Obama's advisors and reflect the actions of the Obama administration.

The problem now, as when Obama took office, is jobs. Jobs, well-paid jobs, put money in consumers pockets and create demand.

...
written by David, August 24, 2012 8:48

Interest rates are low, so overall sales are good, and inventory reduction from the surplus of the bubble years (and repossession fire sales) means sales should be strong while new home sales should be low, for a while.

debt levels
written by Peter K., August 24, 2012 10:06

I am far from an expert on this subject. Is part of the problem debt levels related to the housing market?

The NYTimes editorial says "specially the estimated 13 million homeowners who owe more on their mortgages than their homes are worth."

If these people had their debt levels reduced or deleveraged, then this would add demand to the economy, no?

If these people had good jobs they could pay down their debts also.

housing sales & the economy
written by mel in oregon, August 24, 2012 11:37

housing sales may be back to normal, the stock market is doing well thanks to quantative easing & other manipulations by the fed, but how are the american people doing? probably not too well. no matter what is done now, people who have lost their homes, their jobs, their pensions & their morale can never be made whole.

That might be true where you live
written by ljm, August 24, 2012 10:47

Where I live in Kansas, it's obvious that banks aren't making loans for mortgages. I live in a neighborhood that used to only have houses sell by word of mouth. Currently, we have 6-10 houses for sale in my neighborhood, languishing for months with prices dropped way to low. I'd love to see things back to as they should be.

The Problem Was the Housing Bubble
written by Dean, August 25, 2012 7:18

Folks,

the problem is really simple, the housing bubble drove the economy. It is no longer there. We need something to make up the lost demand. In the short-term, that means government deficits. You're welcome to hate them as much as you want, but that is the only place you will get demand.
In the longer term we need a lower trade deficit. That means a lower valued dollar. Unfortunately, both political parties are controlled by interests that benefit from an over-valued dollar and don't care that it means throwing millions of workers out of work.

Housing Sales Are Back to Trend

About Beat the Press