No One Bought A House In July

The longer prospective home buyers continue to hold out, the better things get for them. The National Association of Realtors revealed some gloomy numbers for homeowners: July sales of occupied homes dropped 27 percent, marking the biggest month-to-month decline in the four decades in which the organization has tracked the figures.

The Washington Post reports that sellers in particularly gruesome markets such as Chicago and Las Vegas can expect their homes to be on the market for at least five months before some sucker comes along to take it off their hands.

If you plan on buying a home, how long do you plan on waiting before taking the plunge and watching your net worth decline every month?

Low prices and rates can’t slow fall in home sales [The Washington Post]

Previously: The Era Of “Investing” In Your House Is Over

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  1. DariusC says:

    I have looked into buying several times, but because the government wont give me 7500 tax break, why should I buy and help their economy? My friends got a bonus, why shouldn’t I?

    Also, homes aren’t selilng for rock bottom prices here… they sell houses with no garages for around 100k… and its South Carolina… Booooo!

    • sth9669 says:

      $100k!! I’d love to be able to buy a shanty for $100k! Try living in Washington DC metro area where $200k buys you a one bedroom condo on the 12th floor of a high rise with no balcony. . . .

      • DariusC says:

        I am sure pay rate is adjusted for your area… Mcdonalds pay there is about my pay here I can assume.

        • Skankingmike says:

          you get paid Minimum wage? Or do you mean McDonalds management which can make 50-70k a year.

          Not sure which you mean :P

          • DariusC says:

            I mean that the money I make here is probably about what mcdonalds workers make there due to the high cost of living. I would assume workers there make at least 10 – 15 an hour…

            • j_rose says:

              You’d assume very very wrong…

              • DariusC says:

                I guess my faith in humanity was misplaced. I apologize.

                • Skankingmike says:

                  it’s minimum wage everywhere. So whatever that states minimum wage is (or if it’s just whatever the Federal Gov. is) is what they make.

                  now Management I know makes a lot, but who the hell wants that job I know a guy who does it and while he may make more than me and even more than most Teachers I know, I would never want to subject my body to that level of stress.

    • Skankingmike says:

      100k gets a wonderful uh.. Crack house…. in NJ so don’t feel bad.

      170-200 gets you a “Handy mans dream!”

      200-250 gets you a fixer upper

      250-350 gets an ok small home

      350-500 gets a 3 bedroom in a decent area.

    • fantomesq says:

      The tax break does nothing to spur home sales, it just artificially props up home prices by, you guessed it, $7500. Better to take the lower price and keep the government handouts out of it.

      • DariusC says:

        Actually, I told them to take 7500 off the price AND get me the 7500 for my tax break. I am not paying more to some slug just because the government is giving it to me. It is a handout to ME and NOT that guy. Of course he wouldn’t accept and I walked away. The house is still for sale.

        • craptastico says:

          so your hardball technique got you nothing

          • DariusC says:

            So why negotiate? Let people and companys bend you over and screw you!

            I think you were looking for another blog, this is consumerist.

            • craptastico says:

              you were parading around as though you saved $15k.

              • trentblase says:

                Sounds like he saved more than $15k. How much would he have paid for the house? Collaterally, how much has that house depreciated since his offer?

          • BHall says:

            My walk-away technique got the previous owners on my house down from 114k to 84k, I looked up the sale history on it and they took a 23.6% loss on what they bought it for, along with the new roof, doors, lighting and A/C they installed. Sure they got something for the copper pipe they ripped out and replaced with PEX, but I got something with better R value and easier to work with.

            Then I got the 8k tax credit.

            Negotiating is fun; never be nice.

    • Mr. Pottersquash says:

      “their”? its not your economy too?

      but I do agree. For a “buyers” market there is no race to the bottom. Ppl do not know how to sell for a loss, banks have no incentive to lower prices. They take it back in foreclosure, recieve govt bailouts and the price stays the same. EVENTUALLY the house is sold via auction to those with the money and just wait for market to swing back around. Its effed up. Im a young professional, great job, would love to get started a home, but I will not pay 95k for a house in freaking lower ninth ward of NOLA with flood walls only at 80% complete….I WILL pay 70k…Yea, I know im preying on unfortunate but damnnit thats captialism!!

    • Fafaflunkie Plays His World's Smallest Violin For You says:

      For $100K in Toronto, I think you can get a parking spot (and not the choice one either). Or a bachelor condo in a 40 year old building in an undesirable neighbourhood. Consider yourself lucky.

  2. pecan 3.14159265 says:

    How does “July sales…dropped 27 percent” mean “no one bought a house in July”? I’ve seen some slightly shaky headlines, but this just doesn’t even make sense.

    And seriously, what’s with the snark against homeownership? It’s still a good decision for a great deal of people. Just because some people at the party were idiots, doesn’t mean it wasn’t a good idea to go. A lot of commenters here are homeowners, and many of them made a responsible decision. While the endless and obsessive pursuit of homeownership as a means of keeping up with the joneses or achieving a false sense of accomplishment is a terrible thing, responsibly owning a home isn’t something anyone should be discouraging.

    • humphrmi says:

      Apparently in Phil’s World, 27% = 100%.

      • syzygy says:

        Apparently, in Phil’s World, exaggeration is used to comedic effect. I wonder if people there have a sense of humor, unlike this world?

    • MaxH42 thinks RecordStoreToughGuy got a raw deal says:

      Meh, I thought the headline was amusing hyperbole. But I agree with you (as usual) about homeownership snark….preemptive anti-snark force, attack! :D

    • myCatCracksMeUp says:

      The headline was FUNNY. Obviously Phil didn’t expect anyone to be stupid enough to think that not a single, solitary house sold in July. The headline was exageration, which is what makes it funny.

      • craptastico says:

        funny? if you say so. of course you think your cat’s funny so you might not be the best judge of comedy

    • FatLynn says:

      Agreed. I wish I hadn’t bought in 2005, because I am upside-down, but I also have plans to be here for at least 5 more years, and my mortgage is less than rent would be for a comparable place.

    • SalParadise says:

      There’s no snark against homeownership. Everyone should engage in a constant battle against nature to keep their house standing. It builds character.

      But seriously, yout home is the single biggest purchase you are ever going to make. And real estate prices jump all over the place. It’s not like bread goes on sale for a nickel less per loaf, with houses, jumps of 5, 10, even 20 THOUSAND dollars (in either direction) are not uncommon.

      So, if house prices are only going to go down by a nickel next month, then yes, I agree with you. Why not join the fray and battle the termites? And if you think a new roof is expensive, just wait until the foundation cracks! Oh, the little joys of home ownership are unquestionably without number.

      On the other hand, if I can save 5, 10, even 20 THOUSAND dollars by waiting until next month, I think that’s a prudent course of action for me. I’m going to need that dough for the inevitable home repairs.

      • katarzyna says:

        Thank you for proving Pecan’s point.

      • captadam says:

        If it’s not you as the homeowner, it’s your landlord as the homeowner. Remember, you need to live somewhere. And that somewhere will always be at the mercy of the elements, requiring constant repair. Either you pay for those repairs directly, or you pay for those repairs through rent.

      • MaxH42 thinks RecordStoreToughGuy got a raw deal says:

        You may also lose 5, 10, 20K by waiting. There’s no point in trying to time the market day-to-day, prices have certainly gone down, and (barring a complete collapse in the economy) they will start heading up again eventually. Of course, then you could always wait for another recession…

        Seriously, just wait until you can buy with a decent down payment and monthly payment that you are confident you can comfortably sustain, and have some additional savings as an emergency fund (for periods of unemployment and/or repairs like replacing a furnace).

        • wildhalcyon says:

          Actually, I have to disagree with this. If we were discussing the stock market, I would agree- you can’t time the market. Its much too volatile, and the changes are most severe immediately before and after large drops or gains.

          But home prices are not like the stock market. The general trend (according to Case) is that they trend inflation more or less. They generally rise and fall slowly – over years, not months or days. And its pretty obvious that no one can really tell when this recession will end.

          I had friends buy a house last year, and so far its lost 20% (roughly $100K) in value in that time. They’re so far underwater, if they needed to sell, they absolutely could not. It will be YEARS before their net worth comes close to what it was when they bought their house.

          Yes, being smart and making decisions on your own time is important, but right now, there are too many bad reasons not to buy for me, even though I absolutely have the cash for it.

          • MaxH42 thinks RecordStoreToughGuy got a raw deal says:

            Very astute, and I’ll admit, you pointed out valid faults in my comparing timing a real estate purchase with day trading. But you admit that “its pretty obvious that no one can really tell when this recession will end”, so how do you know whether this is the bottom of the trough? Or did you mean that once the economy starts recovering for a few months in a row, home prices will lag and give you time to jump in? That sounds plausible but shaky to me, but I’ve pretty much exhausted my knowledge of real estate markets…well, just by using the term “real estate markets”. :)

      • c!tizen says:

        I know right, why not just rent and pay to fix your landlords place. And my god, it’s going to be all kinds of stupid expensive when the roof goes and foundation cracks… if only there were a business that offered some kind of, I don’t know, insurance policy to alleviate some or most of the financial burden when something like this happens to a home owner. That’s just crazy talk though.

        • SalParadise says:

          Yes, I would love to hear of such a business. When I owned a house and had foundation problems, I discovered that my home owner’s insurance didn’t cover slab damage. If you live in a house, I doubt that your home owner’s insurance covers it, either. If it does, you would be doing a real service by mentioning the name of the company.

          I had a builder’s warranty on the foundation, but ran out at year 10. Too bad for me, the cracks didn’t appear until year 12.

          Home owner’s insurance also covers roofing damage, but only that caused by acts of God, not normal wear and tear. So, if you need a new roof, you can pray for a hail storm, but unless you are on a first name basis with you deity, it is unrealistic to expect much in the way of help there.

          I currently live in an apartment. When the roof needs repair, the cost will be amortized across the three families who live under it. When you live in a house, there’s usually only one family there to cover the cost.

          And while foundation damage is always a potential problem, if the rents get too high, I can always move to another apartment.

          If only changing houses were that easy :)

    • katarzyna says:

      I share your irritation with “no one”. IMO, it’s not funny, just sloppy.

      And a big I Know, Right!?! on your other point. Home ownership isn’t for everyone, but it’s worked out quite well for many of us.

    • Taliskan says:

      I took the “No one bought house in July” as a joke/sarcasm in light of the biggest recorded month-to-month drop.

      Though, I can see your point of taking that seriously and blowing it out of proportion. Like any media, take it with a grain of salt. And I know you’ve been around these parts long enough that you shoudln’t read into or take Consumerist headlines completely seriously.

      Breathe. :)

      • craptastico says:

        it’s sarcasm, but it’s also sensationalistic. sensationalistic headlines have helped spur every problem our economy has had over the last 4 years, really even dating back to the dotcom bust. people bought expensive houses/tech stocks/etcetera b/c they read that they had to buy them to keep from being left behind. it’d be nice if “journalists” could try to be more responsible

    • trentblase says:

      Please, this is simple grade school math:

      July sales = May sales * (1-.27)
      July sales = 0

      Solve for May sales = 0/.73 = 0

      Therefore, there were no sales in May or July.

  3. fsnuffer says:

    First of all, this is a classic example of why government intervention rarely works. Since the Obama brain trust feels the compulsive need to monkey with the economy, next time they waste billions of dollars on another give away, taper it off at the end by slowly removing the incentive.

    • Kavatar says:

      You’re right. The government should have done nothing, so instead of the story being “July sales of occupied homes dropped 27%” it would have been “July sales of occupied homes remained dismally low”.

    • PunditGuy says:

      The idea with all the incentives is to borrow from the future, because the future is supposed to be in better shape than the present. Car incentives borrow from future sales because sales are needed right damn now and the future can better handle the decrease. Same with houses. Same with appliances.

      The alternative is to risk long-term damage to several key industries. If companies limp along right now, they’re still in business. If they can’t even limp, they’re not around when things turn around.

      As for “government intervention rarely works,” do you have data to support that conclusion? The CBO just determined — after analyzing actual data — that the stimulus (e.g., “government intervention”) worked.

      • Taliskan says:

        I would believe the CBO more if it wasn’t a government agency.

        Just remember the wheat harvests are up, and everything is getting better and better! :D

        • Skankingmike says:

          How about historical fact, if it wasn’t for FDR’s WPA projects this country would be nothing as to what it is today.

          and from WPA came unemployment reeducation programs.

          So if you’re unemployed right now maybe you should think about going back to school on uncle sams dime.

        • PunditGuy says:

          They’re nonpartisan and — as stated before — looked at actual data. Do you have an analysis of actual data that disputes their conclusion? If so, please share.

      • Skankingmike says:

        don’t argue with them they come out from the bridge to cast a few crazy stones hoping somebody will pick them up and come down for a fight.

    • Loias supports harsher punishments against corporations says:

      Actually, the 8k incentive DID work. And now that it’s gone, it’s no longer working. Irony?

      But I agree, it should have been phased out rather than cut off entirely.

      • hansolo247 says:

        While it “worked” to help sell houses….the price paid for that program was EXTREMELY high for the benefit it produced.

        It was a waste of money.

  4. myCatCracksMeUp says:

    I’m looking for a second home to buy now, close to the beach. I think this is a very good time to buy.

    My current home, which I bought for $200K in 1994 would sell quickly today if I priced it at $700K. At the peak of the housing bubble it would’ve sold for maybe $900K. None of my other investments have done as well as my house.

    • dolemite says:

      I really think it’ll pay to wait a bit longer. I don’t see employment changing any time soon. There will probably be some really desperate people in another year.

      • chiieddy says:

        Perhaps, but the interest rates on 30 year fixed mortgages (if you can get one) are at 5% and lower. That won’t last. If they can still sell the house and trade up to a property they like, they’re not really losing equity as their new property will still gain the value IT lost during this market. The low interest rate is much better a deal than any government rebate of $6500 (for existing homeowners, which I missed out by 3 weeks, thanks Congress!) would be over the course of the loan.

    • evnmorlo says:

      If mortgage rates go to 10% your investment would disappear.

    • DariusC says:

      If by quickly, you mean 2 years, then yes, I guess it would.

  5. Tim says:

    I think the proper term is “existing” home, not “occupied.” I mean, I guess I’d be fine buying an occupied home, but I don’t want it to be occupied once I move in.

    • c!tizen says:

      “but I don’t want it to be occupied once I move in.”

      …but wouldn’t you occupy it once you moved in?

  6. goldilockz says:

    The lower interest rates are doing more for refinancing than home purchasing. I myself just refinanced this week since I bought my house before the crash. I refinanced for two whole points lower. And honestly, the fact that people are no longer arbitrarily buying houses they can’t afford is a GOOD thing. People are slowing down, saving up, and thinking twice before entering into a contract they know they will only end up defaulting out of.

    • c!tizen says:

      Not necessarily, I just bought a new home and the lower rates worked out great for me. I even got the builder to buy down my rate by 2 points and lock it in with an assumable mortgage which means when it’s time to sell, if rates are back up to 7% – 10% I can sell quickly because of the low locked rate.

      I completely agree about people slowing down. Hopefully the banks learned that letting people with low income buy a high income home with no money down is a big no no. It’s pretty easy to walk away from a mortgage when you have nothing invested in it.

  7. quirkyrachel says:

    I’ve been looking for a condo in Chicago and some owners appear to be in lala land about the current value of their place. This is especially true of people who’ve owned their condos for a long time and also haven’t updated a single appliance. I’ve seen condos with the original 1960’s kitchens, bathrooms, and related appliances, but the asking price is way up there.

    • B* says:

      This is so true. There are a lot of “mansions” with pink woodwork and watery basements in our area. We saw a house listed for around 100k (overpriced already) here with a small animal trap in the second floor hallway!

    • ARP says:

      My guess it that you’re looking up north? Yeah Chicago real estate is a crap shoot right now. There are a number of people who refuse to believe that Chicago was impacted by the Real Estate bubble and stubbornly list their condos as if its still 2006. There’s also a group of people who just want to break even and refuse to short sell. Finally, prices vary drastically by neighborhood with some neighborhoods holding steady or rising while others have crashed.

      BTW- with the popularity of Mad Men and 50’s/60’s modernism, you can buy one of those places and saying you’re being really trendy.

    • myCatCracksMeUp says:

      I agree I’d pass on an overpriced 60’s home; but an un-remodeled 40’s home? I’d snap that up if the price were at least reasonable.

      • DariusC says:

        20 years older is better?

        “Sir, I will pay you 50 dollars and not a penny more!”

        “But I only wanted twen…”

        “NOT A PENNY MORE!”

        • KyleOrton says:

          Older isn’t just older. I disagree with the comment about the forties, I was under the impression the coolest architecture and highest quality was pre WWII. I myself would pay more for a 20’s bungalow than a 60s-80s ranch.

          • lockdog says:

            Cool architecture definitely. Best quality. Maybe, if only because the really bad ones have already fallen down (though there are still a lot of awful bungalows out there with failing foundations, original plumbing and electrical. Honestly, your best bet for quality (as judged by livability is probably late 60s to mid 70s. “modern” wiring, plumbing and building techniques. Open floor plans, generously sized rooms with actual closets. Foundation with at least another 30-50 years in them before needing substantial repair. Fireblocking in wall instead of balloon framing, at least some insulation. If you’re lucky you might even find a house with it’s original asbestos siding. (asbestos was bad for builders, horrible for miners, but as a homeowner it’s fireproof, lasts damn near forever and rarely needs repainting). Plus you are more liekly to have a larger lot with room for kids or garden or a large garage. All at affordable prices since they aren’t hip like those craftsman bungalows (yet – save that robin’s egg blue tile and atomic pattern formica if you can).

  8. B* says:

    The huge drop probably has more to do with the deadline of the government tax credit passing than anything else.

    It’s too hard to buy a house these days though. It’s not necessarily a buyer’s market like people keep saying. First-time homebuyer programs are still using regulations left over from the housing boom. The real killer in that situation is that they have to approve homes with an inspection that basically disqualifies any fixer-upper. (Supposedly for the health and safety of first-time homebuyers, i.e., not helping them buy homes that need major repairs.) In our area, chipped or peeling paint even in small spots will disqualify a house. So those who really need the help, lower-income young buyers, are forced to look at houses that need no repairs (that is, expensive homes).

    So the programs that usually help people with lower incomes are actually keeping them from buying. (Qualify and buy a house whose monthly payments you can’t afford, or buy a disqualified fixer-upper with a downpayment you can’t afford.) And I’d wager that people with higher incomes already have homes, so they’re waiting for prices to go up to avoid a loss on selling their houses.

    This might only affect a small percentage of the market, I don’t know. But we recently went through this whole process, spent a ton on all the fees and inspections, and guess what? Still living in an apartment. The scam banks and first-time buyer programs are running are keeping some people from buying at all (while still collecting lots of nice fees of course).

  9. chiieddy says:

    Actually, saying noone bought a house in July is a bit of a misnomer. According to William Wheaton from MIT (who did the NPR rounds last night), the numbers suggest the housing inventory is the same. This means that swapping is occurring, people are selling and buying but the inventory isn’t going down. People are selling their townhouse and buying a single family, leading to a net gain/loss of 0. What would have been worse would have been an inventory increase.

    Feeling all good and warm and fuzzy with that knowledge?

    That said, the numbers are awful and indicate the real estate market is still glut with properties and people are opting to rent rather than buy.

    Until the inventory clears out and new construction begins, we’re not going to see a rosy economic future.

    • Skankingmike says:

      I think there are too many homes on the market and there has always been too many homes on the market.

      Our population growth is not as strong as it once was, and only immigrants and minorities will raise that.

      But with a horrible economy, outsourced jobs, and crazed xenophobic party out to scare most of those growth factors away, It’ll be a while.

    • Warren - aka The Piddler on the Roof says:

      Who’s ‘noone’? In which state did he buy a house?

  10. tchann says:

    My husband and I are hoping to buy a home at the beginning of next year. We’re waiting for mainly two reasons: our apartment lease, and Christmas cash (I have good reason to believe I’ll have a nice paper present coming my way). The nice houses in my area turn over fairly quickly, while the sub-par ones linger on the market for years, so there’s no real point in actively looking right now except to see which ones are still for sale in December so we can avoid them.

  11. SpaceNerd says:

    I have mixed feelings about these reports. My wife and I will be hiring a realtor to find a house in January, hoping to move in by March/April. Sitting houses mean lower prices, but I am worried that people will stop trying to sell their houses since no one is buying, so the usually slower winter months will be even worse. This is going to be our first home, and I’d prefer not to be stuck with a sub-par selection.

    At least I’m pretty confident that interest rates will still be nice and low.

    • KyleOrton says:

      There will be a LOT of people who want to sell but might not want the hassle of putting it on the market. You can actually approach them with a friendly note saying “Let me know if you’re interested in selling” and agree to use lawyers rather than Realtors to save 6% for both of you. They can afford to sell for less, don’t have the hidden costs in the form of keeping the house clean for months, open houses etc and you get the house you want.

      To better ensure success, use your city’s property tax records to see what people paid. The people who bought 10+ years ago for less will be more able to sell to you than those who paid 2006 prices.

  12. Bob Lu says:

    The value of a house should be judged by your life in that house., not the price you can sell it for.

  13. Jimmy37 says:

    Yah think that maybe people realize you need to have money to buy a house?

  14. Wang_Chung_Tonight says:

    man as soon as I get enough money up its on. almost halfway…

    lookin at the change of year-stay down market stay down!!!

  15. smo0 says:

    I have a friend potentially moving to Las Vegas from Montana… he said “why go through a short sale when you can hold out for a foreclosure and get a better deal….”

    There’s your answer.

  16. tbax929 says:

    Somebody bought a house in July… me! I didn’t buy an existing house, though. There are so many incentives from builders right now, it made more sense for me to do a custom build. I got all my closing costs paid, a fixed APR for 3.9%, and $5,000 in free upgrades. I live in Tucson, where houses aren’t very expensive, so my $160,000 got me 4 BRs, 2 Baths, and 1800 sq feet.

    I feel bad for those who are struggling during this current economic climate, but for those of us who are doing well and have a decent income and a secure job, I think it’s a great time to buy.

  17. Sian says:

    At least now that homes are not the amazing investment they once were, we’ll see less houseflippers and investment buyers looking to make a quick buck, and that will help normalize prices. For a while there it was just ridiculous.

  18. grapedog says:

    this makes me laugh… i hope housing prices continue to drop… eventually the market will correct itself, and all these banks holding onto all this property that they still have WAYYYY over-valued, will eventually cause them to collapse, and help cleanse the economy so we can begin a REAL recovery, not this fake bullshit recovery hoisted on us by all the fucking idiots running the country.

  19. dush says:

    The artificial propping up of the housing market will ultimately be detrimental.
    As a home owner it pains me to say property values must be allowed to drop so that in this new economic reality people can start being able to afford a home.
    Low interest rates mean nothing if you can’t even borrow that much money.

  20. H3ion says:

    We sold our existing house at a nice gain and bought a new house from a builder who had reduced the prices by 50% to sell of the last couple of lots in the subdivision. We were able to get a 30-year 4.25% fixed rate mortgage. Now I have to figure out the tax on the gain of the original house. We used to be able to roll it over into the new house but the new house is a lot less expensive than the old house.

    If you already own property, the decline in value is more than made up by the decline in the price of the replacement housing. Of course if you’re upside down on your existing property, it’s pretty cold comfort that the newer houses are lower in price.

  21. INsano says:

    I’ve been looking at getting into my first house, but as others have pointed out, the prices are still too high. With Zillow and the like, you can, for example, see that a house sold for 68k in 98, 170 in 2005, and now they want 220 for it. As educated consumers, we can either drive a hard(and realistic) price for what the market is, or just wait for time to do that for us. I’m fine waiting, but I do feel sad for those who still don’t get they should sell at a loss now if they can afford it, the prices are NOT GOING TO GO BACK TO WHERE THEY WERE. I’m looking at buying a home to live in, not as much of an investment, other than a tax break. I’m more inclined to wait a year or two as I think most markets have further to fall, and though I said I’m not too concerned with my house as an investment, I’m certainly not going to jump into an investment that’s on a slide and take it in the shorts while the other guy gets out.

    Lower the price of your home, sell at a loss if you can.