Despite hints this summer that the housing market had hit rock bottom, sales of new homes sank to their lowest level since the government started tracking them more than four decades ago, the Commerce Department reported Wednesday. A day earlier, the National Association of Realtors said that sales of previously occupied homes in July took their biggest one-month plunge since record-keeping began, hitting a new 15-year low. How much longer will the housing market continue its slide? (Watch a local report about the housing slump)
Housing could start climbing back almost immediately: The July plunge is not "the end of civilization," say the editors of The Wall Street Journal. It was the predictable result of the expiration of the $8,000 homebuyer tax credit — people who might have bought in July instead rushed their purchases to take advantage of the government's largesse. Such meddling only delays the completion of the "inevitable correction" that has to run its course before things get better. If Washington would let housing hit bottom, it could start recovering — some even predict a rebound in August.
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It could take a year to sell off excess inventory: Home prices "scream bargain" in many places, and mortgage rates are at all-time lows, say the AP's Alan Zibel and J.W. Elphinstone in The Washington Post, but buyers are hesitating. They expect prices to plunge even further, and with good reason. Thanks to foreclosures and the post-bubble real-estate sell-off, the number of homes "lingering on the market has swelled to nearly 4 million," and it would take a year at the current pace to sell all those homes.
A year? That's wishful thinking: There's little hope the surplus homes will be gone in a year, says Daniel Indiviglio at The Atlantic. "Given the low rate of sales this summer and consistently high foreclosure rate, inventory will likely continue to grow." Nobody knows how many months of demand were "pulled forward" by the homebuyer tax credit — but until the hangover from that program ends, a housing recovery will remain out of reach.
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