The housing industry remains in a depression. The sum of existing and new single-family home sales bottomed last year at 4.1 million units (saar). This year, it has been fluctuating around 5.3 million units. That’s down from a record high of 8.5 million units during July 2005. It matches the pace of sales during the mid-1990s, just before the housing bubble.
Housing activity is likely to remain depressed next year. Despite record low mortgage interest rates, the mortgage applications index for purchasing homes remains around the lowest readings since the mid-1990s. High unemployment and tougher lending standards are offsetting record low mortgage rates.
In addition, home prices are still falling, which must be another reason why home sales remain weak. There’s no rush to buy if home prices are either moving sideways or down. There are four major measures of home prices. The most current one is the median existing home price compiled by the National Association of Realtors. It is available through October. It is very volatile on a m/m basis, so Debbie and I track the 12-month moving average, which dropped to a new cyclical low of $166,108 during October. That’s 25.9% below the record high of $224,283 during July 2006, and the lowest since November 2002.