NEW YORK (MainStreet) -- The U.S. housing market is withering again (if it ever really achieved any kind of stability), and it’s no coincidence that this new decline is occurring at a time when the business headlines are dominated by terms like “historic downgrade”, “massive debt” and “stock market crash”.
Is it really coincidence, as politicians in Washington, D.C. would dearly hope the public believes? Or is the housing market now tied to the plummeting stock market and the bleak U.S. government debt picture?
Most likely, it’s the latter. Housing prices are ultimately tied to consumer confidence, and there’s not a lot of that going around these days. According to the Thomson Reuters/University of Michigan survey of consumer sentiment, July’s number was the lowest in two years – and that was before Standard & Poor’s downgraded U.S. debt, and before the stock market collapsed.
The most recent data certainly seems to tie the current economic and market malaise to lower U.S. home prices, as the latest quarterly report from the National Association of Realtors says. Data from the NAR shows that only 27% of U.S. metropolitan areas experienced home price gains, while home values from each state dropped a collective 5.4% for the quarter, the NAR reports.
All in all, national median single-family home prices stood at $171,900, down 2.8% from $176,800 in the second quarter of 2010.
The NAR tries to put its best spin on the numbers: “Median home prices have been moving up and down in a relatively narrow range in many markets, which shows a stabilization trend,” says Lawrence Yun, NAR’s chief economist “Markets showing consistent price stability or increases are those with solid labor market conditions, such as in Washington, D.C.; San Antonio; or Fargo, N.D.”
But are the numbers in Washington, D.C. – a city that has been a model of stability during the housing crisis thanks to the steady flow of government jobs – all that stable today? Not really, at least on a month-to-month basis, says the Realestate Business Intelligence (RBI) Pending Home Sales Index.
RBI reports the number of home sales contracts inked in July fell an alarming 10.9% from June, although total numbers were up from the same period in 2010. But it’s the choice of words the Rockville, Md.-based firm uses to describe the downturn that should rattle economists, politicians, and homeowners.
“While month-over-month contract activity tends to decline in July, the debt ceiling debate dominating media coverage for most of the month probably caused consumers to pause before making a purchase decision, the RBI said in a statement. “(But) even with the hesitation, new pending sales reached their highest June total in six years.”
Of course, the debate really didn’t heat up in June – that happened in July, and that’s when the D.C. housing numbers fell.
That could be the problem going forward. As long as politicians in Washington don’t get a grip on debt, and get the issue out of consumer’s minds, then housing values in the nation’s capital – and many others as well – are in big trouble.
—For more on how the recent political debate affect your home, check out MainStreet’s look at what the credit downgrade means for your mortgage