Well, now that the bribes... er... federal subsidies for home buyers has expired, the housing market is taking a huge hit.
Marketwatch's report contained these excerpts:
Sales dropped to a seasonally adjusted annual rate of 300,000, the lowest since records began in 1963.
The results were much worse than expected, and economists had expected a 20% decline to a seasonally adjusted annual rate of 405,000.
Sales fell sharply in all four regions, with sales down more than 50% in the West.
The median sales price in May was $200,900, down 9.6% from a year earlier and the lowest since December 2003.
Home builders continued to shed inventories in May, cutting the number of unsold homes by 0.5% to 213,000, the lowest level in 39 years. In the past year, inventories are down 27%, while sales are down 18%.
The inventory of unsold homes represented an 8.5-month supply at the depressed May sales pace, up from 5.8 months in April and the highest in nearly a year.
Home builders are facing stiff competition from a glut of inventory of existing homes, fueled by pent-up demand to move and by high levels of foreclosures and short sales.
In order to qualify for the federal tax credit of up to $8,000, a buyer needed to sign a sales contract on a home by the end of April. New-home sales are recorded at the time of the contract signing.
The tax credit likely pulled many sales forward into the first four months of the year. Sales increased a cumulative 29% between February and April. But once the credit expired, sales collapsed in May.
The big question for housing, and perhaps for the economy, is whether housing will strengthen significantly from here. If sales remain weak, home prices could fall further, which would in turn depress consumer spending, increase foreclosures and lead to more losses at banks.
According to this Bloomberg report:
Banks repossessed a record 257,944 homes in the first quarter, 35 percent more than a year earlier, according to Irvine, California-based RealtyTrac Inc. More than a fifth of U.S. mortgage holders owed more than their homes were worth
Payments on 1.4 million loans are more than 60 days late...
Bank of America has reported $8.4 billion in losses in its home-loan unit since 2008 because of higher defaults.
Bank of America is hiring like mad for their loan default unit which specializes in “default management”
Yeah - the worst is NOT over...
and the thing is this...
We cannot artificially prop up these markets forever.