On Monday the February US Existing-Home Sales number was released and it wasn’t pretty. The number dropped 9.6% to 4.88 million annualized sales, the lowest level in nearly nine years. That number was far worse than expected and has many people calling for a double dip in the housing market.
To put things in perspective, the year-over-year change for sales of previously owned homes is 2.8% below the 5.02 million pace set in February 2010. The national median existing home price has dipped to $156,100 this past month, which is 5.2% below last year’s level. In addition, the housing inventory is up 3.5% to 3.49 million existing home for sale, which represents 8.6 months of supply compared to 7.5 months in January.
These numbers can be blamed on the bad weather that plagued most of the US this winter, as well as the recent geopolitical events. However, even with those excuses most experts don’t have much confidence that the sluggishness in the housing market will end anytime soon.
Yesterday, a survey from MacroMarkets, Robert Shiller’s company, found that out of 111 economists and housing market specialists, almost 50% of them foresee a double-dip in home prices occurring in 2011. Shiller was quoted as saying that, “not a single panelist expects national home prices to recover to the pre-bubble trend in the coming 5 years.”
In my opinion, the bearish reasons far out weigh any bullish ones when it comes to the housing market in the near term. For many people, rising prices at the grocery store and at the gas pump present a significant challenge in which to save enough money for a down payment on a house. That is in addition to the weak labor market and tight credit conditions that pose huge hurdles for the American public. Also, the geopolitical events in North Africa, the Middle East, and Japan also create a sense of fear in the global economy, which isn’t good for the housing market.
As I look forward to the next 12 months, I see an inflationary environment in which government stimulus winds down and the markets begin to anticipate a rate hike. Therefore, I believe the residential real estate market will continue to be severely challenged and unfortunately, a housing recovery is no where in sight.
What do you think? Do you think housing is in for another double dip? How is the residential real estate market where you live? Leave your comments below!