There's much more involved in today's awful housing sale reports, but it points out a continuing flaw with efforts to jump-start the economy -- they tend to delay the inevitable rather than fix the problem.
Car sales plunged after Cash for Clunkers expired. Consumers put their wallets back in their pocket after the appliance rebate program. And now home sales have gone toes up after the expiration of tax credits that were designed to get people into new homes.
The report on home sales -- they've dropped 27 percent -- was much worse than expected. How bad? The worst in 15 years.
And one analyst says we're already in another recession. Mark Sandi made his assessement on Monday after predicting today's housing report.
The national median price for a home is about $182,000, according to today's report from the National Association of Realtors. The hardest-hit region was the Midwest, where home sales fell 35 percent in July. Home sales in the Midwest priced between $100,000 and $250,000 fell 46.5 percent. But sales of homes priced at over $1 million increased from a year ago in every section of the country.
Of the 20 largest metros, the drop in home sales was most pronounced in the Minneapolis area, where sales dropped by 42%.
Today in Indianapolis, Charles Evans, the president of the Federal Reserve Bank of Chicago opened the door to the "R" word.
"Although there are some signs of general economic recovery and some evidence of home-price stabilization, we are certainly not out of the woods," Evans said.
Translation from FedSpeak: "Hang on tight."
You won't see an improvement in the housing market until you see more stability and confidence in the job market. Would you buy a house if you were concerned that you might not have a job in 6 months? Employers are not confident about the future of the economy. Looking for employment myself, I thought I saw a little uptick in the job market about 3 months ago, but it seemed to vanish as quickly as it came. If I wanted an unpaid internship, there are dozens of those in a heartbeat, but the kind of jobs that lead to buying a home are far and few between.
Deflation won't help matters either as buyers hold off on major purchases if they think that prices have not bottomed out.
Consumers who, in previous years, were able to get easy credit and now can't get any, will also be sidelined for the foreseeable future. In the long-term, that's probably a good thing, but it does not help those businesses who would have sold goods and services in the short-term.
As housing sales slump, it's reasonable to assume that it will also have some impact on furniture sales, home improvement sales, and so on.
On the other hand, profits are up at GM and Ford, and manufacturing is up. Farmers are looking at record crops this year.
As for unemployment, it is up to private companies -- many recording large profits right now -- to step up to the plate. Some folks are beginning to wonder if some firms are not hiring to stoke voter anger and dissastisfaction at the party in power.