Home prices off 15.3% year over year
The worst part about this is that the 15.3% loss represents a hefty piece of American consumerism. Its now safe to suggest that people who purchased homes in the last few years have $0 in equity, and are even upside down on their homes. While this may seem to be a microeconomic situation, the macroeconomics are beginning to show through. People don’t have spending money nor do they have the HELOC to fall back on.
Even with a large 20% down mortgage (something unheard of since the real estate boom) the amount of money available through home equity lines is gone. Ask Starbucks, they’re feeling the pinch in Florida and California where their retail sales have dropped due to the real estate/credit crunch.
Luckily for the market, and the economy, the amount of economic stimulus checks shipped in June greatly outpaced the number in May. This is comforting as its likely that this money has yet to hit the economy. The downside is we’re likely to see even higher commodity prices as that $600 rebate is going straight to the gas pump and the grocery store.
The only way to shore up home prices for now would be more FED intervention, something that won’t happen unless the inflationary concerns disappear any time soon. Bernanke can’t afford to lower rates any more, if anything he’s going to be raising them. And if rates take off, there’s no doubt that the real estate market will continue to fall. Between a rock and a hard place for sure. Dump the homebuilders, dump the creditors, let the commodities come back a little and make a play.
