Total existing home sales plunge to lowest on record: Now is a terrible time to be buying a home

Total existing home sales plunged 27.2% to 3.83 million units in July (the total sales series starts in 1999 and this is the lowest level on record) from 5.26 million units in June.

Single-family existing home sales declined 27.1% in July (to the lowest level since May 1995), while condo sales dropped 28.1%. The declines in existing home sales were broad based by region.

BOTTOM LINE


This shouldn't be a surprise to anyone who follows this blog. The homebuyers’ tax credit boosted home sales for many months (and likely borrowed forward sales during the first half of this year) and the plunge in home sales in July reflects give-back. Though we expected home sales to fall below their sustainable level at some point because of the borrowing-forward nature of the prior surge in sales, this has happened sooner than we thought (given that the tax credit is still available for contract closings) and the size of the drop in July suggests that the tax credit may have been more of a factor boosting sales than previously thought.

This goes along with what we have been saying for the last six months. The housing market has another 15-20% to drop. I don't say this out of smugness and I don't know where it will stop, but I will say this: it has not hit bottom. Forget what your mortgage broker or real estate agent say. Now is not a good time to be buying a home.

In another release, the Richmond Fed's manufacturing composite index slowed to 11 in August from 16 in July (a smaller decline than forecasts). This survey indicates less of a slowing in manufacturing growth than that suggested by the details of the Philly Fed and New York Fed reports for August (a reading of 11 on the Richmond Fed manufacturing composite is equivalent to a 55.5 on an ISM scale). Nonetheless, taken together, the regional manufacturing surveys are consistent with the national ISM manufacturing index in the range of 51 to 52 in August versus 55.5 in July.

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