CNN: Plunging Home Sales Could Sink Economy Posted by AVCU on 10:53 AM

An 8/24 CNNMoney.com article, "Plunging Home Sales Could Sink Recovery," reports on economists warning that a double-dip in housing prices is just around the corner based on sales plunging to their lowest level in 15 years. The result is further threat to slow the overall recovery.
Existing home sales sank 27.2% in July. Much of that drop is attributed to the end of the $8,000 homebuyer tax credit, which had brought buyers out in droves as they tried to sign home contracts before the April 30 deadline. Now, two months later, sales are 34 % below April's tax incentive-induced peak. Economist Paul Dales of Capital Economics says . . 

It is becoming abundantly clear that the housing market is undermining the already faltering wider economic recovery. With an increasingly inevitable double-dip in housing prices yet to come, things could get a lot worse.

The sales pace of all homes -- single-family homes, townhomes, condominiums and co-ops -- is at the lowest since [the National Association of Realtors] (NAR) began tracking in 1999. Inventory has also continued to climb, rising 2.5% to 3.98 million existing homes for sale. That's a 12-1/2 month supply at the current sales pace. A six-month of supply is considered normal. Weak demand and the glut of homes puts downward pressure on prices. As the recession proved, when housing prices collapse, so does the overall wealth and confidence of Americans.
Dales expects housing prices will decline another 5% over the next six months. On the bright side, Dales said while a drop in prices puts a dent in economic recovery, it won't lead to another recession.

The bulk of the downward adjustment in housing prices has been achieved over the last several years, so we're not headed for a complete disaster. We're going to see a double-dip in housing prices, but not a double-dip in the overall economy.

Plunging Home Sales Could Sink Recovery," CNNMoney.com, Hibah Yousuf, staff reporter, Aug. 24, 2010