Home Sales

I didn't realize this: existing home sales reported yesterday reflected the largest drop in anyone's memory, according to CNBC this morning. I did not know it was that bad; the opening paragraphs of this story did not say that, so I don't know how accurate CNBC's commentary is, but again, it "surprised" analysts.

With this kind of news, it's hard to believe that a) price of oil holds up as well as it does; and, b) the economy, as reflected in the stock market and Congressional spending, is doing as well as it is. It appears Congress has lots of money to spend.

With today's report that new home sales plummeted to worse level, either historically, or at least back to 1971, suggests two things: a) a reflection of the general economy (but everyone knew that); and, b) Congress has now introduced a wrinkle to home sales that was used in the car industry to devastating effect. [It's official: worse new home sales report since 1963 when records were first kept. Something tells me the administration will do anything to distract voter -- say, like fire a 3-star general officer?]

That wrinkle: rebates, tax credits, etc. At one time, the car industry did not offer rebates, but once they did, folks would hold off buying a new car until rebates or tax credits were offered. Years ago I read stories about the automobile industry realized they made a big mistake introducing the concept of rebates.

Now, Congress has done the same thing with the housing industry. Why buy a house now if you missed the opportunity this past year when Congress offered an $8000 credit? If you wait long enough, and I think it will be less than one year (with the election looming, it could be less than six months), Congress is likely to offer another credit. And there begins the housing cycle based on Congressional incentives.

By the way, 1,300 prison inmates received $9 million in new home-buying credits; 141 of those inmates were serving life sentences. In all, more than 14,600 taxpayers wrong received $27 million in credits. Other notes: one house was used by 67 folks to claim the tax credit.