My notes as I explore various business and financial topics

Thursday, February 3, 2011

Home Sales Lag - possible Monkey Wrench in Economic Recovery?

As one economic indicator after another trend upwards, one sector in our recovery is lagging.

Corporate profits are increasing relentlessly and the stock market reached new two year highs. But home sales are forecast to decline in 2011, according to HouseHunt Inc., a firm that tracks home sales statistics through its members-agents across the country.  HouseHunt's data, cites some of the following reasons for the struggle in home sales:

  • banks accelerating foreclosures this year, increasing supply of homes on the market
  • rising interests rates from the economic recovery pushing up affordability
  • tougher financing criteria reducing the number of buyers

These conditions will result  in maintaining the trend in declining home prices. Although real estate is just one leg of the economic picture, it is a significant one.

An exception to this are markets in St. Augustine, FL, Vail, CO, Carmel, IN, Eagle Point, OR, and Saratoga, CA, all of which have seen an increase of over 10% in home prices.


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