New Home Sales Down

The economy as we all know is one that is fighting a daily and monthly struggle to regain strength and consumer confidence throughout the country. Today we are reminded that we are far from the glory days when homes were being built at a record pace as many buyers were purchasing in many cases not for themselves but as speculative purchases based on what they felt the home would appreciate to.

August home sales are the second slowest on record and this signals that the housing market will remain a drag on the economy for some time to come.

Apart from my job as a real estate broker, I'm also the proud son of my father whom has been feeling the pain quite possibly more directly than most due to this slowdown in building. My parents own and operate lumber yards and hardware stores. This family owned business has seen better days as my father has recently announced and proceeded with the closing of his second of 4 of his yards. The business had the market not turned would almost certainly be sold and my father and mother enjoying a retirement that after 40 plus years of marriage together they deserve. Like many however and by no means are they an exception, the plan for retirement has not only been put on hold, has faded into the back-burner as all energy is now focused on keeping the final lumber yards up and running. The relationships and employees who have felt the pain of these locations closing also adds to the difficulty of where we stand today in this market as these decisions have left my parents sharing this unfortunate market collapse. Their faith remains strong however and they have strong resolve and I believe they will as the rest of the country will bounce back. The biggest question however is when will things improve?

Builders are competing with millions of foreclosures throughout the country and distressed properties. Until we see a significant decline in those numbers its not likely we will see much of a rise in new construction. The risks for builders is just too high with the credit crunch and the number of capable buyers.

The economists at Bank of America & Merrll Lynch (yahoofinance) predict that spending on building and remodeling homes will decline in the 3rd quarter and actually subtract .07% points from overall economic activity. As a whole we see that home construction is off 74% from its peak in 2006.

What has caused some of the slowdown? Well a few reasons are the high umemployment, tight credit and a huge uncertainty about home prices. Goverment tax credits gave us an unsustainable bump in activity earlier in the year but as we suspect that wouldn't last. Normally its the building industry that powers the economy and we must all hope this industry gains momentum and strength moving forward. Did you know that for every one home built, they say its worth 3 full time jobs for atleast a year?

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