Preferred Financial Services analyzes the recent 33% drop in new- home sales….
Questions to Ponder while reading:
- Have you noticed any uptick in the real estate market in your area?
- Were you one of the millions that bought a house at its peak value and are now stuck in it with no way out?
- Where do you see the housing market going over the next few months?
Andover, Massachusetts June 24th 2010— The housing data for May has been released and the data paints an even bleaker picture than anticipated by the government and private analysts. The Commerce Department reported that the sales of new homes plunged 33% in May from a month earlier to the lowest level recorded since record keeping began in 1963. While this report is obviously bad news for the recovery currently taking place it was not unexpected and the Fed Chairman continues to refute the belief that a double dip recession is still probable.
The new homebuyers tax credit expired at the end of April and economists generally agreed that we would see a steep drop in new home sales. The reason for this is because the tax credit did not create new demand for homes but instead it moved the demand. As expected, once this “free money” vanished new home sales plunged. Since the economy remains fragile and unemployment remains stubbornly high most experts do not believe that the housing market will recover to pre recession levels for a long time. To encourage more lending the Fed continues to keep interest rates at record lows making it very cheap to borrow money. But, until the factors that impact average Americans including job and wage growth improve, we do not anticipate any sort of rebound in the US housing market.
So why is this new data really important? Because the housing sector is a huge part of the US economy and spurred the record growth of the last decade. As home values rose people were able to tap into the equity in their home which allowed them to purchase many of the durable and luxury goods that helped the US economy expand at a healthy clip. As home values plummeted the demand for them did as well. New construction came to a standstill and this impacted a huge part of the economy. Banks felt the pain through foreclosures. Home builders and the entire construction industry felt the pain due to the low demand. Even manufactures of cars, RV’s, and other expensive goods felt the pain as the cheap equity vanished and consumers couldn’t afford to take on more debt. The end result of all of this was mass layoffs as demand created a glut in supply for almost everything and forced the suspension or closure of many factories and offices.
In my opinion I predict a gradual housing rebound that will take a few years to reach the pre recession levels. I do believe that everything is dependent on the jobs market. If people can find work and make money they will be able to spend more again, which will have the trickle down effect that the country needs.
Preferred Financial Services is a debt reduction firm certified by the CFC (Center for Financial Certifications) and accredited by U.S.O.B.A. (United States Organizations for Bankruptcy Alternatives). Headquartered in Andover, Massachusetts, Preferred Financial Services has been a leader in the debt reduction industry since 2003. Preferred Financial Services has acquired some of the best experience in the industry over the past 7 years. In 2009 alone Preferred Financial Services reduced over $16.5 million worth of consumer debt for just $6.4 million, for a savings of about 60%- and over 2,900 accounts were settled on behalf of their clients.
For more information, please visit www.pfsdebtrelief.com or follow us on our blog at www.pfsdebtrelief.com/blog/ .
Contact:
Stephan Tavernini
