Slumping Housing Market Has No End In Sight
The slumping housing market sent financial stocks tumbling today for their worst drop in nearly a decade. The National Association of Realtors issued a report that stated sales of existing homes fell 2.6% in the month of June.
“We are faced with a considerable excess of housing units that is only likely to worsen over coming quarters, and for which there is no quick solution,” wrote Richard Moody, chief economist for Mission Residential.
About a third of sales are distressed sales, either foreclosures or short sales, in which homeowners accept less than they owe on the house, with the lender taking the loss. Many foreclosures aren’t included in the data at all because they are not sold through the Realtors’ multiple-listing service.
At this point no one knows when the housing slump will end. A number of factors have combined to make it quite difficult for a recovery to happen.
The amount of surplus homes on the market have kept prices falling for an extended period of time. While this would make it seem like a buyer’s market, demand remains depressed as the general economy worsens and lenders are much more careful about who they loan money to.
The financial sector has been locked in a downward spiral with the housing market as rising default rates have caused hundreds of billions in writedowns as firms have had to scrambled to raise capital. Before it’s all said and done the final tally could reach $1 trillion.
Mortgage markets are struggling, from originators to insurers and rising interest rates are the result. The Federal rescue plan for Fannie Mae and Freddie Mac have stopped some of the bleeding for now but while many in the government were hoping they would be an integral part of a housing turnaround that seems farfetched at the moment.
