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The latest report on existing home sales show the housing market will continue to be a drag on the US economy. Sales were well below forecast and prices are at a 9 year low. Short sales and sale of foreclosed homes were 39% of existing home sales and this may account for the fall in prices. Prices for existing homes are well below the cost of new construction. Inventories are 30% higher than they were before the recession and they are also a drag on the market. The inventory numbers may even understate the real level since banks have not put all of their non performing inventory on the market.
Rising employment may help the market over time but the weak housing market prevents the economy from growing fast enough to bring unemployment levels down at a faster rate.
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