Despite the lure of record-low mortgage rates, fewer consumers stepped out from behind the fear of a global economic slowdown to purchase new homes, curtailing new sales by 2.3 percent month-over-month in August. Market watchers chalked up a six-month dearth to consumers wary about their job security, stock markets, and the threat of a new recession.[IMAGE]
Under the umbrella of the ""Commerce Department"":http://www.commerce.gov/, the ""Census Bureau"":http://www.census.gov/const/newressales.pdf signaled a fallback to 295,000 housing units on a seasonally adjusted basis, down from 302,000 from July. New-home sales figures tanked for all regions except the Midwest, which saw consumers scooping up 53,000 residences.
""[I]n the current climate a new home is a luxury that many Americans can no longer afford,"" ""Paul Dales"":http://www.capitaleconomics.com/staff/global-economics/paul-dales.html, a senior U.S. economist with ""Capital Economics"":http://www.capitaleconomics.com/, wrote in a note Monday.
Although Hurricane Irene may have crunched new-home sales in New England, he says, it is ""much more likely that the willingness and ability of households to buy a new home was dented by the turmoil in the financial markets and growing signs of a sustained and significant economic slowdown.""
August made itself as heady an event for the markets as the storm system. A narrowly avoided debt default at the national level drove ratings heavyweight ""Standard & Poor's"":http://www.standardandpoors.com/SPComIPResolver to ""downgrade U.S. credit"":https://themreport.com/articles/markets-shake-with-gse-home-loan-bank-downgrades-2011-08-08 from AAA to AA+, sapping GSEs ""Fannie Mae"":http://www.fanniemae.com/portal/index.html and ""Freddie Mac"":http://www.freddiemac.com/ and 10 federal home loan banks of their creditworthiness in the same stroke.
The move helped upend stock markets, which slashed gains by historic margins on several occasions as euro-zone economies grew less and spent more, with some, namely Greece, poised to default on their debt obligations.[COLUMN_BREAK]
Downplaying headwinds from around the country and world, analysts and economists say, the real problem for housing still lay with a weak U.S. economy, which assuaged few nervous homebuyers by ""slashing as many jobs as it added over August"":https://themreport.com/articles/housing-industries-freeze-alongside-zero-job-growth-2011-09-02.
""The hub on the wheel is jobs,"" ""Greg McBride"":http://www.bankrate.com/blogs/federal-reserve/about-greg-mcbride-cfa.aspx, a senior financial analyst with ""Bankrate.com"":http://www.bankrate.com/, a finance Web site, told _MReport_ in a past interview.
He said that consumers would continue refraining from investments like mortgages until the national employment numbers improve.
""With job growth at a standstill, the stock market swinging wildly, Congress wrangling over the debt ceiling, and the euro zone's problems sending consumer confidence down, sales of new homes are slipping from an already weak pace,"" ""Celia Chen"":http://www.imn.org/pages/biography.cfm?personid=30DE66589034, senior research director and housing specialist with ""Moody's Analytics"":http://www.moodysanalytics.com/, offered in Monday comments.
She said the housing market continues to waffle despite an all-time high for house affordability, which rock-bottom mortgage rates shape even in failing to stimulate chronically low demand.
Bankrate.com and Freddie Mac more recently found interest rates for the benchmark 30-year loan at ""4.29 percent and 4.09 percent"":https://themreport.com/articles/europe-feds-treasury-buy-up-keep-mortgage-rates-low-2011-09-22, respectively, reflecting lows not seen in the history of surveys for either company.
Chen also referenced competition from a high tide of foreclosures with new home construction, with a ""RealtyTrac report"":http://www.realtytrac.com/content/press-releases/august-2011-us-foreclosure-market-report-6836 recently revealing a 7-percent month-over-month uptick over August as foreclosures rose to 228,098 from July.
Tellingly, a ""National Association of Home Builders/Wells Fargo index"":http://www.nahb.org/news_details.aspx?newsID=13446 released last week showed a three-month dearth in confidence among homebuilders, with points for the index dipping from 15 to 14.
""To be sure, new-home demand still faces many obstacles, and the risks to this outlook are decidedly on the downside,"" Chen wrote.
Whither new-home sales in a bad economy?
She forecasted that job creation ""will remain weak until next year,"" with new-home sales continuing to ""meander close to bottom for the remainder of this year before picking up in 2012.""