What the drop in (July) home sales could mean

By now, if you’re awake, you’ve heard that July home sales (existing homes) fell 27% to a fifteen-year low. (For more detail, click here to see the story posted by CBS News.) Of course, that means if you sell real estate or home mortgages, July was a rough month. But there might be some less obvious issues that are worth thinking about, depending on the business you’re in.

Implications: Lost in most of this coverage is the idea that a few months of falling home sales were inevitable; the first-time home buyers tax credit—which expired earlier this year—arguably sped future buyers into the market ahead of schedule. Thus, people who would have been shopping in June, July and August rushed their plans and bought earlier in the year, instead. (In a sense, the industry enjoyed a significant number of sales leading up to April that may not have occurred until summer; this increase in sales was stealing business out of later months.)

Another contributing factor to this continuing real estate slump is the sluggish job market. Home sales will not be “zesty” until people feel more secure about their jobs and incomes.
On the positive side, folks who are staying in their existing homes (against their true wishes) longer than they had hoped might consider doing things to take the boredom out of the old house. Think home furnishings, appliances, home theatres and other home improvements.

Also on the positive side, there are consumers who—through life stage progression, job changes, etc.—continue to move toward “prime” with regard to their need to sell a current home and buy a new home. A significant number of these folks obviously delayed acting on their dream home in July… but that does not mean desire does not exist. Watch for signs of “pent-up demand” to help move more people into the housing market, perhaps by late this year according to some pundits.

The recovery is going to happen in fits and starts. We knew that. But even in one category’s challenges there are opportunities in hiding for related and competing industries.

Mike Anderson