March 24, 2011
Everyone knows it’s rude to double-dip. But recently, fears of a double-dip have been far more serious than worrying about your not-so-hygienic friend at a party.
Some disturbing numbers were released about the US housing market recently that would make even the most cockeyed economic optimist frightened. And for some analysts, this is likely the first solid indication of the dreaded double-dip recession in the US.
According to the National Post:
“New home sales in February fell 17% to an annualized rate of 250,000 units, the slowest pace of sales activity since the agency began tracking figures in 1963. The median sale price fell 13.9% from the previous month to $202,100, the lowest value since December 2003.”
But before you run for the hills, some food for thought: analysts thought that the housing market had its groove back at the beginning of the year and many people, including banks, jumped the gun on that prediction.
Mortgage rates rose and more stringent borrowing standards put the brakes on an already stalling market, which resulted in the figures you see above. To make matters worse, what little purchase activity existed was primarily in resale homes.
And the construction market is definitely feeling it.
Home construction sits at 450,000 units (about 1 million short of the norm). And if those bare numbers don’t mean much to you, consider this: new home construction is very close to its “irreducible minimum.” That means that the number of homes being built basically matches the number of homes being demolished. Ouch.
What’s really scary about these figures, is that there’s no end in sight. 1.5 million homes are sitting vacant in Florida alone – and that number is expected to go up. Many homeowners are in the nasty position of having more mortgage debt than what their home is actually worth (which is being called “shadow supply”). At that point, it would be difficult not to just throw up your hands and foreclose.
The bottom line is: unemployment is still high. Demand can’t be expected to rebound when people don’t have jobs – period. And that’s scary.