Housing Market: Not As Bad As Feared

by: David Andrew Taylor

New homes sales came in Friday. There were a few out there that were quick to point out a 17% drop for the year. Fine. I'll point out the 37% increase for the 2.5 years prior. In the end, we are exactly where we started before the big rise in the housing market. Not below it. But, exactly at that point. So, was it so bad?

Our economy saw a highly lubed financing opportunity for homeowners. Those home owners took that opportunity and went with it. Now the free ride is over, and now we are sitting at growth levels that are probably normal. With the lowered interest rates, some Americans were able to take some cash out of their homes, reduce their debt burden, and help fuel the economy along.

Here are the charts for new homes sales and existing homes sales, respectively:

new homes

existing homes

There are many out there that think this little bubble is going to continue to burst, and with that send our economy into a tailspin. Hardly. The vast majority of Americans that refinanced are finding themselves in a better situation because of their lower monthly payments. True, there are some that have found themselves in a sticky situation because they got some kind of A.R.M. that is moving higher with interest rates. But, that obstacle won't kill our economy. Our economy was supplemented during this timeframe. But, our economy hardly depends upon the real estate industry.

What fuels our economy is consumer spending. With 65% or so of our economy fueled by consumer spending, and numbers coming in fairly strong for the Christmas season, I think we'll be weathering the downturn just fine, now that we are at normal sales figures and normal interest rate levels.