April 22nd, 2013 5:58 PM by Nick Rapplean
In the month of March, 0.6% fewer existing homes sold than in the prior month. Is it just me, or is this ridiculous?
Many home markets in California have next to nothing to sell. Distress sales have declined to nearly 20%. People are buying new homes based on diagrams drawn on the back of napkins. And 0.6% fewer homes sold??
Something doesn't add up. We even have dour economists predicting that the real estate market will once again fall into a slump, prices declining, sales falling off, optimists eating their words. (Why exactly, when improvement for real estate sales bring so much money into the overall economy- into everyone’s pocketbooks- do there always seem to be so many people ready to jump on real estates successes and hammer them into the ground?)
So what is ahead? Who knows? -but it is reasonably clear by now that Lawrence Yun of CAR has been right all along: We need (1) inventory and (2) slightly more flexible lending.
The markets, meanwhile, are making it reasonably clear that, given the chance, mortgage rates will rise. That chance arises when there are more homes for sale. More homes for sale = more sales = slower appreciation = higher interest rates = a marketplace that makes more sense and looks more normal than any we've seen for years.
It all turns, you see, on available homes for sale- not on lowest possible interest rates (which we've had for a very long time now, to little beneficial effect). Not even an improved jobs market turns on the lowest possible interest rates, costs of borrowing or even costs of making improvements to one's business.
All that has done to keep the cost of doing business low- including keeping our interest rates as low as they've ever been in history- have essentially resulted in huge savings accounts for profitable corporations. It hasn't resulted in overall economic growth because what's to invest in when money keeps rolling in the door and there's no need to get competitive, or to grow, or to develop new ways of attracting customers.
We seem to be throwing good money after bad and bad after good... and not investing where we can anticipate results that will replenish our economy.
More soon. Meantime, I'd love to hear from readers. I want to know if I'm missing something in this picture of an economy with its feet stuck in the mud.