Not since May 1997 has the Mortgage Bankers Association's Purchase Index (updated this morning to reflect last week's lending activity) dropped so low. "Housing demand remains relatively weak,” said Michael Fratantoni, MBA's Vice President of Research and Economics. “With home prices continuing to drift amid an abundant inventory of homes on the market, potential homebuyers do not see any urgency to lock in purchases.” Mr. Fratantoni does not even address the shadow inventory of homes entering foreclosure, a number variously estimated at between 3 and 5 million before year's end. So, yeah, a super-supply will undoubtedly pressure prices.
But it's not simply a case of cagey consumers waiting for a better deal. Many do not have the means to pull the trigger. With interest rates at historic lows (and about to explode higher?) and the federal government's First Time Homebuyer's Credit about to expire in a few months, now is a good time to buy for those who qualify. But it ain't happening. The inescapable conclusion is that a double-dip recession is at hand.
Need more data? Two hours after the MBA release came this from the Commerce Department: sales of new homes in the U.S. in January were down 11.2% compared to December and down 6.1% year-over-year. New homes sold at an annualized rate of 309,000, the lowest rate since record-keeping began in 1963.
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