Summer Doldrums Worse Than Usual This Yearby Tim Manni
The summer months always tend be slow(er), at least as housing is concerned. After the spring home-buying season, real estate activity slows, people take vacations, go away for long weekends. Instead of worrying about house hunting, borrowers are more concerned with barbeques, content to push their buying decisions down the line a few months.
“Summer is generally a lazier time of the year for borrowers,” said HSH VP Keith Gumbinger.
However, given the slew of negative economic reports we’ve seen over the last few weeks, the evidence suggests that this summer season may be even slower, even quieter than many in the past; and that has to do with a lot more than just housing.
Poor Home Sales, No More Stimulus
Let’s start off with what we already know: summer is a slow period for real estate activity to begin with. Yet, given the fact that the homebuyer tax credit has borrowed from future demand, it stands to reason that home sales will be even more anemic than in the past. May’s home sales numbers support this theory and June’s probably will too.
In April, the last month borrowers had the chance to cash in on the homebuyer tax credit, home sales were up all around. Come May, new-home sales declined to record lows:
May’s new-home sales report added to the concerns of industry insiders and experts alike in a major way. The record-setting drop of almost 33% last month was, like the existing-sales report (see below), a surprise to some analysts. While the overall opinion was that sales were going to falloff after the tax credit was through, the abrupt and massive nature of the decline was the bigger shock.
Despite the addition of 433,000 jobs in May (revised slightly upward), June’s employment report was quite the opposite. According to the labor department, non-farm payrolls fell by 125,000 last month, the first month of negative job growth all year. The massive falloff in hiring was mostly due to government census workers.
The one bright spot (if you can even call it that) is private payrolls grew by 83,000 in June. However, as Ezra Klein of the Washington Post noted on Twitter this morning, “I don’t take comfort in the fact that non-census payrolls grew[...] Census jobs were still jobs. And now those people are unemployed.”
Up to this point, production was one sector of our economic output that was keeping us afloat. While the GDP numbers haven’t been fantastic in 2010, production has played a large part in keeping the country’s GDP in the black.
Manufacturing growth has spurred economic activity because of “inventory rebuilding” after deep drawdowns during the recession. Yet with a weak consumer and now the additional headwinds of continued overseas turmoil, even our economy’s most stable output has a taken a hit, and will likely struggle through the summer.
Where Do We Go from Here?
With all this speculation, with all this uncertainty headed into the rest of the summer (and the year for that matter), we ask, “Where do we go from here? What is it going to take to get us moving again?”
We’ve had a $700 billion stimulus package that, up to this point, hasn’t generated significant growth. Beyond low mortgage rates — which are expected to create at least some homebuying/refinancing activity — there are no supports in place for future homebuying.
What is it going to take to get us out of this hole — more credit? Is cheap and easy credit the solution to the problem that was caused by cheap and easy credit?