Pending homes sales drop 3.2% in July
Pending home sales are off 6.8% since last July and it isn’t very hard to believe that they’ll continue to drop. The economic stimulus check may have put a boost in June numbers when people were more apt to be able to make down payments or have the financial ability to move. But as July came to a close, the number of pending homes dropped by 3.2% signaling weakness in a market that has certainly paid its dues over the past two years.
Its hard to call a bottom for a market that has yet to even indicate that it may be turning around. A brief boost from the economic stimulus package was welcomed by investors, but the lasting impressions are still far away. There are still 11.2 months worth of unsold houses on the market, analysts usually consider 6 months to be the adequate number for a healthy supply of homes. Past that, the housing market is likely to fall into a serious bear market where the price of homes must be dropped exponentially in order to sell unsold inventory.
A bailout of Freddie and Fannie does little to prop up the housing market. Instead it focuses attention to solving the financial crisis before the housing crisis. Though investors welcomed the buyout by buying shares up, the bull market run is unlikely to sustain. If Fannie and Freddie were to fail, so would various institutions but it would be likely that homeowners would actually get a better deal by settling their debts and refinancing. So while the market rebounds for now, expect only a short lived recovery. And that home you’re trying to sell, forget about it, especially with inventories this high.
