The vast numbers of recent foreclosures are driving property values down and could prevent many potential buyers from entering the housing market this year. The President has promised to help Americans to keep their homes and create jobs and the Federal Reserve has asked legislators to extend aid to the banking industry. Credit has become increasingly harder to obtain, unemployment is climbing, and many fear prices will continue to drop. Experts predicted a drop of 3.5% in pending sales following a preliminary report of a 6.3% December gain.
Legislators may have to increase aid to banks over and above the $700 billion already aimed at the housing crisis. Just last week the Fed. Res. Chairman Ben S. Bernanke suggested that the recession could last well into 2010 unless the right combination of legislation can be found to bring stability to the tumultuous financial system. The S&P 500 index fell to 696.33 yesterday, the lowest it's been since October of 1996.
Pending resale are viewed as a primary indicator since they track contract signings. The Realtors' existing-home sales report counts closings, which will typically not occur until a month or two after the contract signing. The pending index was released for the first time in March '05 and contained data all the way back to January '01. Last January, the index fell to 80.4, the lowest number ever reported. 3 of the 4 regions showed a drop including a 13% drop in the Northwest and a 12% fall in the South. The West actually saw a modest increase of 2.4%. From January of last year, pending sales fell more than 6%. Sales of new homes also fell in January to the lowest point since such records have been kept.
Prices for both new and pre-owned homes are also down from last year. This and a drop in average borrowing costs have brought more homes within the grasp of buyers. The NAR's affordability index climbed to 166.8 in January the highest level since 1970, when records were first kept.
The S&P'500 Supercomposite Homebuilding Index has dropped 20 percent so far this year as sales continue to slow. The index has dropped a total a little over 75% over the last 3 years. The largest homebuilder in the country, Pulte Homes, Inc. reported its ninth quarterly loss in a row last quarter. Home improvement outlets are also suffering. Home Depot, Inc. reported a loss last quarter, closed its Expo design unit and is laying off close to 7 thousand employees.
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