During the month of October which is the latest period available, sales of house were up 1.4% from the previous month. This is a seasonably adjusted rate of 4.97 million units. Last year's level was 4.91 million units, and that was the lowest number in the last 13 years. In the meantime, mortgage rates are collapsing at under 4%. It's been 60 years since we have seen that low a mortgage rate.
Now here's the kicker, the median price of a house is currently $162,500. This is down 4.7% from a year ago. This means that the sheer number of homes being sold is UP, but they are being sold for less because prices are down.
So how do you figure out what's happening. The answer is that in October a disproportionate number of contracts fell through. The deal simply could not get done. The answer is two-fold. Appraisals are coming in under the agreed value between the buyer and the seller and therefore – no deal. The second reason is that many buyers upon putting in their paperwork are not getting the deal approved. Lending standards are getting stronger.
What you need to know is this. Housing prices must turn around because this country cannot have a major economic recovery without housing coming back. Too great a segment of the economy is dependent upon housing. The sheer number of industries involved in the housing industry is mind boggling. Buying furniture, paint, and new sheets, appliances, all of it without a housing recovery imperils the economy. At best we will move along at a weak 2% or lower growth rate, and that doesn't spell well for America.
When a house sells, 25 different
unrelated industries benefit directly