The Last Bear Standing

...Total home sales are at their lowest level in almost four years. New home sales are close to a seven-year low. Prices are falling in many areas where there was a bubble in prices. Even though we have seen a significant decline in new home construction, the number of homes for sale continues to rise. Look at this chart from www.dismal.com.

The homeowner vacancy rate rose to a new all-time high, even as rental vacancy rates fell slightly. Overall home ownership in the US is falling and is now at a three-year low. Including new homes under construction, there are a total of 2.5 million homes vacant, which is well over 3% of the total of the US housing stock (77.2 million non-rental homes).

A weakening housing market has four major effects on spending, according to Scott Hoyt, writing for the Dismal Scientist. First, it obviously hurts spending on housing construction-related spending, such as home improvements, furniture and appliances, and building materials.

Second is through the job market. Housing-related employment was up to 50,000 jobs a month during the boom and is now a drag on employment. Hoyt suggests the worst is still to come, as many smaller employers have not yet cut back.

Third, there is a clear drag on household wealth, where there is an estimated 9 cents of consumer spending for each dollar in the increase in the value of a home. With the likely prospect that home values are going to fall, this will put consumers in a less spirited mood....