August 24, 2010: The big economic news of the day, and probably the week, was the big drop in existing-home sales in July reported this morning by the National Association of Realtors sates the Washington Post. This was to a certain extent expected after the expiration of the home-buyer tax credit in the spring, allowing NAR chief economist Lawrence Yun to offer up the delightfully sunny spin we have come to expect from NAR chief economists:
Consumers rationally jumped into the market before the deadline for the home buyer tax credit expired. … However, given the rock-bottom mortgage interest rates and historically high housing affordability conditions, the pace of a sales recovery could pick up quickly, provided the economy consistently adds jobs.
House prices need to fall some more (in real terms, at least) to lure in enough buyers to pull the housing market out of its depression. So why not accept that reality, and push policies that help people cope with the effects of it, rather than continuing to prolong the inevitable?
Housing will eventually recover from its great swoon. But many real estate experts now believe that home ownership will never again yield rewards like those enjoyed in the second half of the 20th century, when houses not only provided shelter but also a plump nest egg states the New York Times.
How low will they go?