September 23, 2009

For the first time in five years, existing-home sales have increased for four months in a row and are 5.0 percent above the 4.99 million-unit pace in July 2008.

According to Freddie Mac, for a 30-year, conventional, fixed-rate mortgages fell to 5.22 percent in July from 5.42 percent in June; the rate was 6.43 percent in July 2008.

First-time buyers purchased 30 percent of homes in July, and distressed homes accounted for 31 percent of transactions.

Total housing inventory at the end of July rose 7.3 percent to 4.09 million existing homes available for sale, which represents a 9.4-month supply²at the current sales pace.

The national median existing-home price³ for all housing types was $178,400 in July, which is 15.1 percent lower than July 2008.  Distressed properties continue to weigh down the median price because they typically sell for 15 to 20 percent less than traditional homes.

Regionally, existing-home sales in the Northeast surged 13.4 percent to an annual pace of 930,000 in July, and are 3.3 percent higher than July 2008.  The median price in the Northeast was $236,700, down 15.0 percent from a year ago.

Existing-home sales in the Midwest jumped 10.9 percent in July to a level of 1.22 million and are 8.0 percent above a year ago.  The median price in the Midwest was $157,200, which is 5.9 percent less than July 2008.

In the South, existing-home sales rose 7.1 percent to an annual pace of 1.95 million in July and are 5.4 percent higher than July 2008.  The median price in the South was $164,500, down 7.1 percent from a year ago.

Existing-home sales in the West slipped 1.7 percent to an annual rate of 1.13 million in July, but are 1.8 percent above a year ago.  The median price in the West was $202,300, which is 28.0 percent below July 2008.

Source, National Association of Realtors

Let’s review. Home prices are low. Interest rates are low. Banks have money to lend (although they are snake bit and so are appraisers). So why isn’t real estate pulling us out of this recession any faster?

Here is why. Credit fear. In 2004, 70% of all mortgages were approved and anyone with a credit score of 660 or better could qualify for a good rate. Today, only about 50% of the mortgages are being approved and it takes a credit score of 740 or better to qualify for the best rate. Banks have dramatically tightened their lending criteria.

Additionally, consumers have cut back their borrowing by $21.6 billion from June to July, the biggest drop since the Federal Reserve began keeping records in 1943. That has made many economists nervous.

Fear and uncertainty among consumers could very well lead to a second downturn.

The solution? Everyone needs to go buy something! Think I’ll buy another saddle for my horse! Go ahead and buy that new four wheeler or snowmobile and let your wife go running rabid through a mall with your credit cards. Do it for the economy!

This is hilarious. And actually seems to have some merit to it.

Daniel Brogan is the founder, editor, and publisher of 5280: Denver’s Magazine.

In his blog this week, he wrote an article entitled Fellas, Have You Bought New Underwear Recently?

It’s called the Men’s Underwear Index, and it is a gauge of consumer confidence.

Sales of men’s underwear typically are stable because they rank as a necessity. But during times of severe financial strain, men will try to stretch the time between buying new pairs, causing underwear sales to dip.

“It’s a prolonged purchase,” said Marshal Cohen, senior analyst with the consumer research firm NPD Group. “It’s like trying to drive your car an extra 10,000 miles.”

So, according to the theory, when men start buying underwear again, it’s a sign that they believe better times are coming. And that’s exactly what’s happening.

Retailers are reporting encouraging signs in the men’s underwear department.

No less an oracle than former Federal Reserve chairman Alan Greenspan has given this theory credence, as described in a report on NPR two years ago.

This is great! The recession is ending and many of us can now quit going “commando!”