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Generational Dynamics Web Log for 25-Aug-2010
25-Aug-10 News -- Existing home sales plunge 27%

Web Log - August, 2010

25-Aug-10 News -- Existing home sales plunge 27%

Suicide bomber kills 30 in Somalia, including 7 members of Parliament

Existing home sales fall 27%, shocking analysts

In June, I posted a report about an apparent worldwide decline in economies around the world, and that we appeared to be headed once again to a worldwide freeze in trade and transportation, just as happened at the end of 2008. (See "7-Jun-10 News -- Globally, May was a month of ominous events.")

July 2010 - existing home sales <font face=Arial size=-2>(Source: Bloomberg TV)</font>

July 2010 - existing home sales (Source: Bloomberg TV)

Since that time, I've reported on one trend after another that confirms that this is continuing, including jobs trends, manufacturing trends, GDP, and collapsing European economies (Greece, Spain).

On Tuesday, analysts were stunned to learn that existing home sales fell 27.2% nationwide from a month early. This was more than twice as bad as expected by analysts, who had expected a fall of only 12.1%.

The LA Times quotes one analyst as saying, "You are seeing the sales drop off a cliff again, and that is really starting to scare people. Are we going to have a double dip? Nobody knows."

A number of analysts claimed that the figures were anomalous or outliers. The justification for this claim is that the homebuyers' tax credit expired for purchase agreements signed after April 30. Many people rushed to sign agreements before the deadline, and those deals closed in May and June, and so the reasoning goes that the July number is only temporary, and it will be back to "normal" by August or September.

Well, that might be true, but the above charts don't support it. The third chart shows the rate of existing home sales of a 20 year period. The housing bubble began in the mid 1990s, and peaked in the mid 2000s decade. Since then, existing home sales have been falling steadily -- except for the brief period in which the homebuyers' tax credit was in effect. I've drawn a yellow line on the graph to show the general downward trend, and the July plunge appears to be returning to the long-range downward trend. In other words, it's the increase in sales in the previous months that were the anomaly. We're now returning to the actual trend.

In fact, the figures for housing are devastating. There is already a 12.5 month inventory of homes on the market. Not counted in that is the "shadow inventory" of foreclosed and delinquent homes held by banks, but not yet put on the market. (See "'Shadow inventory' of unsold homes continues to grow.")

And not counted in those two groups are houses that are "sidelined." I hadn't heard this term before today, when it was discussed by an analyst on tv. This refers to people who would like to sell their homes, but are holding off doing so in the hope that the housing prices will start going up again. If you add this group to the two groups described in the previous paragraph, there are probably 3-4 years of inventory on the market or waiting to go on the market.

For months, so-called "experts" have been promising that the end of the housing bubble, and the prosperity that goes with it, were just around the corner. I heard one expert today on television predict an "upside surprise" after Labor Day, and a stock market surge by the end of the year. It's exactly the same promise I've been hearing month after month, ever since the financial crisis began in October, 2007.

Meanwhile, the second quarter GDP report is due out Friday, and some analysts have expressed fear that it will be lower than expected.

Additional links

Somalia's al-Qaeda linke al-Shabab terrorist group conducted a suicide attack on a hotel in Mogadishu that killed 30 people, including seven members of Parliament. VOA

Somalia's government says that hundreds of foreign fighters have joined al-Qaeda linked terrorist groups in Somalia, from countries including Afghanistan, Pakistan and the Arabian peninsula. The al-Shabab terrorist group has gone from a local threat to a regional threat, as it's launched attacks in Uganda and Kenya. Reuters

Authorities investigating the 2008 crash of Spanair flight 5022 have discovered a central computer system used to monitor technical problems in the aircraft was infected with a trojan horse style computer virus. The infected computer failed to detect several problems that would have aborted takeoff. Tech News Daily

If you're interested in horse racing, and even if you're not, take a couple of minutes to watch this video of the 7th race at Monmouth Park on Monday. YouTube

TheUglyBugBall.co.uk is a dating web site for ugly people. "Just because they don't look like Kate Moss or Cheryl Cole doesn't mean they don't have a lot of love to give," according to the owner. The Sun

(Comments: For reader comments, questions and discussion, see the 25-Aug-10 News -- Existing home sales plunge 27% thread of the Generational Dynamics forum. Comments may be posted anonymously.) (25-Aug-2010) Permanent Link
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Generational Dynamics Web Log for 25-Aug-2010 25-Aug-10 News -- Existing home sales plunge 27%

Existing home sales fall 27%, shocking analysts

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Generational Dynamics Web Log for 25-Aug-2010
25-Aug-10 News -- Existing home sales plunge 27%