Washington continues its attempts to prop up real estate and residential construction. Yet the federal government still has not squarely confronted the enormity of the real-estate crisis. Foreclosures are high and, by some accounts, rising. An estimated quarter of all homes are underwater (mortgage debt exceeds home value).
Last month two reports illustrated the situation's fragility. January's new home sales fell to 309,000 and existing home sales shrank to 5.05 million. Homes are not selling well despite low interest rates and subsidized sales.
New Home Sales
(Click on chart to enlarge.)
Recessions shaded
Existing Home Sales
(Click on chart to enlarge.)
Recessions shaded
Plug the latest data into the charts and you can see that sales were stronger at the end of last year than at the beginning of this year. Building can't revive if homes don't move. And homes won't move as long as the specter of foreclosure hangs over the market.
It's not that nothing is being done. It's just that not enough is being done. Foreclosures won't stop if homeowners can't meet their mortgages or have lost the incentive to do so.
(The charts were taken from http://www.beyourowneconomist.com. [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.)
© 2010 Michael B. Lehmann
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