It was a lovely dream while it lasted, the dream that the recession had ended. But today's report on existing home sales has surely shaken the confidence of even the greatest optimists. Home purchases fell to 3.83 million units, a year-over-year decline of more than 25%.
This data may be difficult to put in perspective, since it's both annualized and seasonally adjusted. Home buying patterns vary drastically over the year, falling in winter and rising in summer. Warm weather is more comfortable for house-hunting, and families with children want to settle in before school starts in the fall. The table shows data for single-family home sales (excluding condos and co-ops) in the month of July for every year back to 2000.
30-year Mortgage Rate
Normally home sales rise as mortgage rates fall. This year breaks the pattern. We experienced the least number of sales for any July since 1995 accompanied by the lowest 30-year mortgage rates ever. At the very time mortgages are effectively on sale, no one is buying. There is nearly a year's supply of single-family homes on the market. It's the biggest backlog since 1982, when we had a recession and mortgage rates of 16.75%.
The plain fact is that the housing market is dependent on employment. Only when job creation begins in earnest will we see a real improvement in home sales. And only then will the recession be over.