Wednesday, August 25, 2010
Housing market dwindeling in July
The government released a report Wednesday that showed an unfortunate decrease in the housing market, specifically in reference to new home sales in July. The Commerce Department has found that new homes purchases in July of this year were 32.4% lower than in 09' . The author said that this drop was not unexpected and in fact, Analysts surveyed by Thomson Reuters had expected that sales of new homes would be nearly non-existent in the months of June and July. A large portion of this drop can be accounted for by the fact that July was the first month that new homeowners no longer qualified for a tax credit of up to $8,000 when they purchased a new home. It would seem that many people in today's economy are simply staying in their existing homes and cherishing them as their only true strong asset. This theory is supported by a recent report by the Mortgage Bankers Association which showed that home refinancing loans accounted for 82.4% of the total application last year.
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It’s not surprising to me that a dramatic fall in housing sales is following the tails of the expiration of the $8,000 housing tax credit. It shows that people are still leery of our economic situation despite the government’s assurances that “the worst is over.” Furthermore, it displays the possible fallacy in the stimulus plan. While the government down plays the role the housing tax credit played in July’s numbers, I believe this combined with our current unemployment numbers could indicate that we’ll soon face the recession’s consequences which were delayed by the stimulus plan.
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