Annual Existing-Home Sales Fall Most in 17 Years

Graph showing median price and existing home sales. From MSNBC

This is off The Washington Post:

Sales of previously owned homes fell slightly in December after two consecutive months of modest gains but took their steepest annual drop since 1989, the National Association of Realtors reported yesterday.

But home prices rose 1.1 percent for the year, and the supply of existing single-family houses, townhouses, condominiums and co-ops for sale shrank from November to December -- offering some hope that the housing market may be on the mend, economists said.

[....]

"During the summer, the housing market was like a trauma patient being wheeled in with multiple wounds," said Michael Larson, a real estate analyst for Weiss Research. "There's some momentum back in the market, but I don't think the patient will get off the gurney and walk out the door any time soon."

In 2006, 6.48 million existing homes were sold, down 8.4 percent from 2005, which was the busiest year on record. The drop was the steepest since 1989, when sales fell 14.8 percent from the year before.

In December, existing homes sold at a seasonally adjusted annual rate of 6.22 million, down 0.8 percent from November and down 7.9 percent from December 2005.

Now the WaPost is calling this housing slump a "sideways trend," saying that rate of sales is stabilizing between 6.2 million homes sold to 6.3 million homes sold in the recent months, after peaking in June 2005 at 7.27 million homes sold. In fact, the realters and housing economists are claiming that this is all good news. I'm not so sure. According to the WaPost story:

The inventory fell 7.9 percent in December from November. If no more homes are added to the mix, there's a 6.8-month supply of existing homes for sale.

That shrinkage is typical in the slow winter months, when sellers tend to pull their homes off the market before re-listing them in the spring, many analysts said.

Instead, some analysts pointed to the year-over-year increase in supply. Inventory climbed 23.3 percent from December 2005 to December 2006.

[....]

In December, existing-home sales, which account for most home sales, fell 15.5 percent in the West, 7.1 percent in the South, 5.8 percent in the Midwest and 5.5 percent in the Northeast. The South includes the Washington area.

MSNBC News is reporting that the drop in housing has driven off the speculators, interested in making a quick buck churning houses, claiming that some 40 percent of the market represented investment or second-home purchases in 2005. If the speculators have been driven out, then Americans who will be purchasing homes will be either first-time homebuyers, or current homeowners looking to move up in the housing market. The question I have with this is whether the current job market can support this housing recovery. We've already seen a huge rise in the jobless claims. We've seen Ford take a huge $12.7 billion loss, where they plan to cut their hourly workforce by 40 percent--about 30,000 employees--through buyouts and early retirement packages, and the shedding of 14,000 salary employees. This type of loss is really going to affect the auto industry--not just General Motors and Chrysler, but even the auto parts suppliers, the steel, rubber, or even the shipping and transportation industries. I also saw this small MSNBC article, titled Union membership drops to record low:

WASHINGTON - The number of wage and salary workers who were union members dropped to 12 percent of the work force last year, the lowest percentage since the government started tracking that number over two decades ago.

The number of workers in a union was 20.1 percent in 1983, when Bureau of Labor Statistics first provided such comparable numbers, and that number has been declining steadily. More than a third of American workers, about 35 percent, were union members in the mid-1950s.

The continuing decline in union membership, documented in the BLS report released Thursday, comes as organized labor is pushing for legislation in the Democratic-controlled Congress making it easier for workers to form unions.

That proposal, called the Employee Free Choice Act, would let workers form unions more readily by simply signing a card or petition, impose stronger penalties on employers who violate labor laws, and allow for arbitration to settle first contract disputes.

Advocates of the legislation say they doubt that it will get signed into law by President Bush, but that they think passage in Congress would make eventual signing of the law more likely.

Supporters say the law is more fair to workers because employers can’t mount a campaign to prevent formation of a union. Opponents say it deprives workers of the right to vote privately on their union preferences, and can lead to union intimidation of workers.

The union membership rate for government workers, 36.2 percent, was substantially higher than for private industry workers, 7.4 percent.

So there is a lot of change going on here--change that I don't think will be good for the housing market. I'm not sure that the job situation is as good as the econopundits are saying--I wonder if there are too many Americans who have been dropped off the unemployment rolls, or have taken jobs that are part-time or below their skill levels. This union membership story makes me wonder if corporations are forcing Americans into accepting low--perhaps even slave wages--while corporate CEO pay continues to go sky high.

This can't go on forever.