Home Sales Take Steep Plunge

Existing Home Sales Down 8.6% In November; New Home Sales Fall 2.9%; GDP Shrinks Further

(CBS/AP)  Sales of existing homes plunged far more than expected last month as buyers recoiled from October's financial wreckage on Wall Street. The median sales price fell by the largest amount on record.

The National Association of Realtors said Tuesday existing home sales fell 8.6 percent to an annual rate of 4.49 million in November, from a downwardly revised pace of 4.91 million in October.

Sales had been expected to fall to a pace of 4.9 million units. according to Thomson Reuters.

"We still have a housing market that's well over-supplied, especially in the existing home market," real estate analyst Mike Larson told CBS News Radio. "Demand continues to remain weak because of slumping confidence, tightening lending standards and rising unemployment."

The median sales price plunged 13.2 percent in November to $181,300, from $208,000 a year ago. That was the lowest price since February 2004, the biggest year-over-year drop on records going back to 1968 and most likely the biggest drop since the Great Depression.

Lawrence Yun, the normally upbeat chief economist of the Realtors group, found few positive spots in the month's dismal data. But he did note that after prior stock market crashes home sales usually rebounded within a few months.

"We hope that, similarly, the current slowdown in home sales activity is a short-term phenomenon," Yun said, noting that people in the real estate industry are "crossing our fingers" that the market will recover. Sales fell around the country, with the largest drop - of 12 percent - in the Northeast.

But other analysts see the trend continuing into the New Year, with the government able to do little to reverse it.

"It's a little biti of an uphill battle for policy makers and I think that the overall outcome is for housing to continue to remain weak and be a little bit of a lead anchor here as we head into 2009," Larson told CBS News Radio.

Meanwhile, the Commerce Department reported Tuesday that new home sales dipped 2.9 percent to a seasonally adjusted annual sales pace of 407,000 units. That was a weaker performance than economists had expected and was the slowest sales pace since January 1991.

The median price of a new home sold in November was $220,400, a drop of 11.5 percent from the sales price a year ago. That was the biggest year-over-year price decline since a 12.7 percent fall in March of this year. The median is the point where half the homes sold for more and half for less.

The Commerce Department also reported Tuesday that the gross domestic product, the broadest measure of economic health, declined at an annual rate of 0.5 percent in the July-September quarter, while corporate profits fell 1.2 percent.

The fall in GDP was unchanged from an estimate made a month ago. The decline in corporate profits was slightly larger than the 0.9 percent fall estimated a month ago.

Analysts believe that GDP, the economy's total output of goods and services, is falling at an even sharper pace in the current quarter, reflecting the fallout from the worst financial crisis to hit the country since the Great Depression.

Some believe the GDP plunge could be as large as 6 percent in the current October-December quarter, which would make it the largest decline since a 6.4 percent drop in the first quarter of 1982.

Many economists think this quarter could mark the low point of the recession, which is already the longest in a quarter century, having started in December 2007.

They are forecasting smaller GDP declines in the first and second quarter of next year before the economy starts growing again next summer. If the recession ends in June 2009, as many economists are forecasting, it would have lasted 18 months, making it the longest recession in the post-World War II period.

"I think that there's a bit of a relief out there that the worst of the panic is over," Diane Swonk, chief economist at Mesirow Financial, told CBS News Radio. " Unfortunately, that panic had real economic consequences and we still have to deal with that."

The 0.5 percent drop in GDP in the third quarter followed a 2.8 percent increase in the spring, a period that was boosted by the distribution of millions of economic stimulus payments.

President-elect Barack Obama favors a massive second stimulus measure of around $850 billion, which Obama is pushing Congress to pass early next year to limit the severity of the downturn.

For the government's last look at third quarter GDP, there were only minor revisions. Spending by consumers plunged at an annual rate of 3.8 percent, slightly larger than the 3.7 percent fall reported a month ago. It was the biggest decline in consumer spending, which accounts for two-thirds of economic activity, in nearly three decades, since an 8.6 percent drop in the second quarter of 1980.

Residential construction, where the current economic troubles began, fell at an annual rate of 16 percent in the third quarter, while non-residential construction, which had been buffering the construction industry, faltered as well, dropping by 1.7 percent.

The 1.2 percent fall in corporate profits followed a 3.8 percent drop in the spring and represented the fifth straight quarter that corporate profits have fallen.

The National Bureau of Economic Research has said that the country slipped into a recession in December 2007. In the October-December quarter of 2007, the GDP was falling at an annual rate of 0.2 percent. GDP then grew by 0.9 percent in the first quarter and 2.8 percent in the second quarter before falling by 0.5 percent in the third quarter.

While the common rule of thumb for a recession is two consecutive quarters of falling GDP, the NBER uses other data to determine when recessions begin and end including employment statistics. The economy has lost jobs every month since January, shedding 1.9 million payroll jobs this year, including more than a half-million jobs lost in November alone. The unemployment rate now stands at a 15-year high of 6.7 percent.

Congress enacted a $700 billion rescue program in October, and the Federal Reserve has expanded its loan programs by hundreds of billions of dollars as the government has tried to combat the credit crisis. But all those efforts have so far failed to prompt banks to resume more normal lending patterns.

As a consequence, many businesses are struggling to attract the financing they need. The weakness is spreading around the world, which has been bad for U.S. exports.

Peoria, Ill.-based Caterpillar, Inc,, the world's largest maker of mining and construction equipment, said Monday that it would cut executive compensation by up to 50 percent next year due to slower demand amid the global economic downturn, becoming the latest of several large firms to slash compensation in an effort to lower costs.

Earlier this month, Memphis, Tenn.-based FedEx Corp. said it would cut pay for senior executives and freeze 401(k) contributions for a year, while AK Steel Holding Corp. of West Chester, Ohio, said it planned to reduce pay for salaried employees by 5 percent in 2009.

The recession already is the longest since the 1981-82 slump, which lasted 16 months.

[rushlimpdrug]

The rules keep changing on buying a home.

I know folks that have perfect credit scores
and are unable to finance a home.

To bad.

[jowand]

Why would big oil want to build more refineries? that would create more supply than demand and drive prices lower...they want all they can get per barrel.High prices entice more exploration,I live and work in the oilfields and see the whole process from start to finish.

Posted by tincup356 at 08:47 PM : Dec 23, 2008

New refinery going up, un-noticed, in N Dakota.

[khanghi-2009]

If it is that viable, why hasn''''t it been successful in the marketplace? Even with billions in taxpayer subsidies, these technologies are barely viable right now.


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Posted by JT_Lancer at 08:45 PM : Dec 23, 2008

Again, JT, the "powers that be" are capable of keeping this technology from the marketplace. How? Did you know the EPA is working on a program by which those who collect and burn used cooking oil in their deisels would be required to hold a HazMat certificate?

Just one example.

[sonofapundit]

what goes down comes up? isaac newton (if he could hear you) would throw up... and what would come up would go down. if it''s gonna go up, why isn''t everybody investing??? give me a break. you''re obviously trying to salvage your portfolio. the problem is that in a culture of theft (here, the american culture), no portfolio is secure. and to the extent you know that yet attempt to induce others to invest... well, (drumroll...) that''s theft. :) just kiddin''. but you know as well as i do that there ain''t gonna be no dayum recovery anytime in 2009. no way. we need INDUSTRY, and we need BRAINS. we seem to have neither anymore.

[tincup356]

Why would big oil want to build more refineries? that would create more supply than demand and drive prices lower...they want all they can get per barrel.High prices entice more exploration,I live and work in the oilfields and see the whole process from start to finish.

[jt_lancer]

Khanghi - ''Anyone with half a brain could look to some of the other technologies on the market and figure out science has already developed the technology we need. It''''s being kept from the marketplace by the Washington WH0RES on BOTH SIDES OF THE AISLE that are beholding to big oil.''

If it is that viable, why hasn''t it been successful in the marketplace? Even with billions in taxpayer subsidies, these technologies are barely viable right now.

[tincup356]

Why would anyone want to buy a new built house? Developers are gouging badly on the turnkey costs of homes. The materials used now days , such as particle board....are not near as dependable as real lumber and plywood...people have a house with 50,000$ worth of junk material, 50,000$ worth of labor, plus 40% to make a profit,,,,,then add on loan interests,,,and over tax values...then you have a 250,000 dollar pile of manure that is not actually worth more than 90k ....looks like the developers have out priced themselves to greed land, right along with the bankers.

[khanghi-2009]

"Economies problems.
High oil prices brought on by a domestic shortage, caused by Congress'''' blocking oil drilling and refineries for years."

jowand


You''re wrong, I''m affraid. High oil prices have nothing to do with blocked drilling or lack of refineries built. That scenario would be based on supply and demand. Otherwise, you wouldn''t have Exxon/Mobile recording record profits for the past four years. Big oil wants you to think that, in order for fuel prices to drop, we need to increase supply. If, in fact, supply was limited, there would be no record profits on their end.

No, boys and girls, the real secret to all of this is to abandon the "Flintstones philosophy" that fossil fuel is still viable. Anyone with half a brain could look to some of the other technologies on the market and figure out science has already developed the technology we need. It''s being kept from the marketplace by the Washington WH0RES on BOTH SIDES OF THE AISLE that are beholding to big oil.

By the way, jowand, who made you moderator?

[likenoone-2009]

No recover after spending 8 billion before the ink is dry

[jsd330]

The banks should have been disapproving any loans for houses that were inflated in price.

posted by rudy6543

I agree, it all goes back to greed and poor business decisions.

[whitemale08]

Of course they keep falling.

Whatever happened to the ''hope now'' program from Hank the Snake Paulson?

It''s amazing how the ''hope now'' program was just another derivatives scam where banks that loot TARP funds can loan that money out under ''mortgage modification'' programs guaranteed by the government.

The mortgage-modification program is nothing more then scam that spreads out late payments and piggy-backs the interest in new closing costs.

Lyndon Larouche was right, pass his HPBA bill that puts a ''moritorium'' on all foreclosures which will stabilize the system until all the quadrillions in derivatives are cancelled under bankruptcy re-organization.

[Michael Arnold]

And there''s more to come.

The banks & auto workers have gotten their booty before all hell breaks loose. Have you gotten yours yet?

[zzy-izzy]

If you got any money in the bank get it out now

[noloyalisti]

We need to start to organize massive boycotts and general strikes while we still have something left. Before the corporations and fascist government they control steal the rest of it.

[slinginrich]

If the same money that was given to banks was instead given to the Citizenry to pay off debt, the Banks would STILL end up with it in the end, while debt would be severely reduced, helping both segments.
The way it was done, just bypassed the Citizenry and gave directly to the banks, without ANY reduction in Citizen Debt, and without any requirement of disclosure as to where the money went.
We''re getting ROYALLY Screwedd....

[rudy6543]

Posted by jsd330 at 05:14 PM

The banks should have also been disapproving any loans for houses that were inflated in price.

[jsd330]

I can remember when I bought my house in 1973, how hard it was to get a loan. My employment record was checked, my credit was checked, all of my bills were totaled up and my wifes income couldn''t be counted, because if she got pregnant and couldn''t work, my salary would have to pay all of the bills. The banks used to make sure you could afford the loan.And I had a 20% downpayment.And it took a month for the loan to go through. In the past 25 years my morgage was sold 21 times. It was kind of a joke on who will we be making the house payment to this month.
These morgage brokers don''t care anymore as long as they make a sale. And the real estate brokers are the same, they don''t care if you can afford the house or not, they just want to make a sale.The banks and real estate people used to sit down with you and figure out what you could afford, no one bothers to do that anymore, it''s just plain GREED.

[rudy6543]

Posted by nowaymcgoo at 04:45 PM

Excellent post that really addresses the issue.

[bjcone8559]

"...People who are credit deadbeats shouldn''''t get a loan, they are the cause of the morgage meltdown along with the crooked loan officers...." Deadbeats, or the poor, or whatever you want to call them, didn''''t cause this. Since when did deadbeats/the poor have that much power?


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Posted by frankistage


You are simply echoing the misplaced and ill-directed talking points from the rabid right wingnuts such as Limbaugh, Hannity, etc.

This DEPRESSION we are faced with is not the fault of the American citizens chasing the dream.

Ronnie RayGun sealed our fate when he infected America with ''trickle-down'' economics. He handed the keys to the kingdom over to the greediest and most corrupt element of society... big business.

Trickle-down coupled with republican de-regulation are the reason you and your family will suffer.

You and those like you, in your little minds, listen to the voices of the very people who have done this. You will parrot phrases like "we must support business because they supply the jobs" without ever stopping to think that unbridled greed kills jobs.

Families are losing their homes not because they bought more home than they deserve (as your heros would state), but rather because they bought homes based on their realistic expectations for the future.

Greed moved their jobs to slave labor countries!!

[samthetvcat]

I''m surprised team Obama hasn''t made the focus of restoring confidence their overhaul of the regulatory framework - like does anybody know whether or not he''s going to let that repeal of the Glass-Steagall act stand? His old campaign policy platforms said it needed to be repealed and that it was a good thing, but that the new ''updated'' regulatory framework that needed to go up never did under Bush.

Like what does that mean? Where does he stand on putting that firewall back?

What sort of conditions or additional oversight might he and Nancy be thinking of putting in place before they give the banks with their crappy lending records the other $350,000,000,000.00 of the TARP?

Do they understand that faith in Government is as low if not lower than faith in Wall Street?

etc, etc . . . :(