What now? That’s the big question as the economy stutters along and home sales continue drop like a stone: July 2010 down 26% from July 2009.
In his New York Times article, David Streitfeld commments:
“If last year’s tax credit was supposed to be a bridge over a rough patch, it ended with a glimpse of the abyss. The average home now takes more than a year to sell. Add in the homes that are foreclosed but not yet for sale and the total is greater still.
Builders are in even worse shape. Sales of new homes are lower than in the depths of the recession of the early 1980s, when mortgage rates were double what they are now, unemployment was pervasive and the gloom was at least as thick…”
Current opinion is that the administration is out of chips in this housing poker game and needs to fold. “The administration made a bet that a rising economy would solve the housing problem… ,” said Howard Glaser, a former Clinton administration housing official with close ties to policy makers in the administration. “They are deeply worried and don’t really know what to do.”
Given all the above, the new word from some economists is starkly different from the past: Let it crash. No more ‘extend and pretend’ policy choices.
“We have had enough artificial support and need to let the free market do its thing,” said housing analyst Ivy Zelman.
That’s bad news for sellers who have been hanging on thinking that the market will be ‘righting’ itself in the foreseeable future. Predictions are for an additional 5 – 10% drop in housing prices on top of the generally accepted 30% drop suffered thusfar in the recession. Ouch.