Housing Market Turning The Corner

It has been a long uphill struggle.  In the early 2000’s, the country was flush with money.  There was disposable income for all sorts of activities, extra vacations, summer homes, fancy new cars, and expensive electronic toys.   One area that really took off was the housing market.  The normal progression in life was to start a family and own your home.  Consumers started scouring the housing market for the ideal location to raise their children.   Buyers started to outnumber sellers, resulting in high demand.  This led to the natural increase in prices and in competition for homes.  With a stable economy, fewer regulations, and a flow of revenue, banks and mortgage companies started lending money at a rapid pace.  Unfortunately, corners were cut, the process was streamlined and details were overlooked and ignored.  The average American citizen took loans which were unsustainable.  The housing market crumbled under its own massive weight.



Soon, people were refinancing their home mortgages as interest rates were at an all time low.  The homeowner accumulated more and more debt, all with the naïve idea that they would be able to pay it back in the future.  This did not happen. Property was overvalued, and income streams were inflated and overblown.   Over time the housing market corrected itself, as most economic indicators will do, lowering home values.  It resulted in a vast majority of people owing more money on their homes than the housing market could support.  People stopped paying their mortgage.  Foreclosures became the norm.   Neighborhoods were populated with vacant lots and houses.    The situation was compounded further by instability and lack of confidence in our financial institutions.  The country suffered a huge economic crisis.

Over the last five years, the country has been slowly digging out of the economic doldrums.  As the stock market continues to soar, the job market and housing market lag behind, keeping the economy in a state of stagnation.  Recently, the housing market showed definitive signs of regression, raising new concerns that any hopes of a recovery may be dashed.  However, after two months of backward movement, there may be some good news in the country.

According to number released by the United States Department of Commerce, in the month of April the sales of new homes rose 6.4%.  In comparison, in February, the sales of new homes had dropped by 4.4%, and in March they plummeted by 6.9%.  Experts attempted to explain the slide by stressing the effect the winter snowstorms had across the entire country.  Now, with the advent of spring, there is hope in the air that the housing market may finally be on a positive swing upwards.  This can only mean good things for the economy.

It is not all good news.  Even though April produced good numbers, the rate of purchase of new homes was much slower than a year ago.   The sale of homes is operating about ½ the rate of a strong or stable housing market.   The slow increase in the cost of homes and the increase in mortgage rates during the past few years have contributed to the reduction in the number of real estate transactions.  After all these years, there is still a major concern over the demand for newly built homes.


Some additional statistics create more questions for the troubled housing market. Over the last 12 months, sales of new homes have declined by 4.2%. . The median sales price in America was $278,000 in April which is around 2% lower than in previous months. The majority of purchases are for homes under $250, 000, and that statistic fell over the last 12 months.  Correspondingly, the number of homes sold worth over $750,000 actually rose during the same calendar year.   In 2004, the rate of home ownership in the country was 69.2%.  At the beginning of this year, the rate had dropped to 64.8%.

The housing market has always exhibited a cyclical nature.   The low point during 2008 was so severe, as the numbers indicate that it will be a while before we start to show positive signs of growth.  However, the sales of new homes in April give hope that the housing market may be turning a corner.


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