July existing home sales lowest in 15 years
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Bill Radke: Well, today’s housing report was just plain lousy. Sales of existing homes down 27 percent in July. It was the lowest level for single-family homes in 15 years. Now in a moment, we’re going to talk about where this economy might be going. But first, we’ll stop and think about where we’re not going.
Here’s Marketplace’s Mitchell Hartman.
Mitchell Hartman: What does it mean when home sales slow so much, even with home prices way down and mortgage rates really cheap?
Kenneth Johnson: People are essentially being frozen in place by the recession.
Demographer Kenneth Johnson at the University of New Hampshire says one key group is really frozen in place: Middle-class families. They often own homes already. Usually, they’re moving around a lot — trading up into a bigger house or relocating.
Johnson: They’re saying, “Why should we risk moving? Even if I get a new job in a new place, we don’t know whether the spouse is going to get a new job.” And in a lot of the larger companies, people are turning down transfers, because they’re hesitant about whether they can sell their houses.
Johnson says older people also aren’t budging. Ordinarily, they’d be moving on, making room for the families with kids.
Johnson: The retirees are saying, “You know, we’ve got the money to move if we want to, but our 401s aren’t as big as they used to be, and I don’t know if we’re going to be able to sell this house, so why don’t we just stay put.”
That decision to hunker down, for potential buyers, often comes down to price, says University of Wisconsin economist Tim Riddiough.
Tim Riddiough: If consumers start developing expectations that housing no longer generally goes up in value, that house prices are flat or even declining, that takes away an incentive to move now. You’ll wait for a cheaper price in the future.
Portland realtor Jeff McBride is seeing buyers wait for ever-better deals. People who own homes are refinancing with low mortgage rates, then remodeling.
Jeff McBride: They’re just kind of sitting on the fence [a little bit]. You know, people are worried about their jobs, and they actually decide that, “Hey, I like my neighbors. The house I’m living in isn’t so bad.”
And they’ll be gossiping over the backyard fence with those same neighbors for a while until the economy gets better, and people start moving again.
I’m Mitchell Hartman for Marketplace.
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