Home Prices Plunge, Sales DropThe only people taking advantage of home sales are the bargain hunters buying at distressed sale prices, says the National Association of Realtors. The industry association says the number of existing homes sold in November dropped precipitously 8.6 percent and median home prices suffered the worst drops.
Existing home sales dropped to an annualized 4.49 million units, far below the 4.93 million units projected. October sales were an annualized 4.98 million homes. About 45 percent of the transactions nationally were of distressed properties. The realtor association blames the financial market turmoil for the devastating report. The price drop was the largest the association ever recorded and may be the worst decline since the Great Depression.
The drops in sales come despite declines in property values. A median existing home sale price was $181,300 in November, down 13.2 percent from 2007 when a median existing home sale price was $208,800. The surplus of unsold homes ballooned to 4.2 million in November. Home inventories have hardly moved in the year, compared to last year when there were 4.27 million existing homes for sale. Existing home sale prices are at the weakest point since July 1997, prices drops have taken gains back to February 2004. New home sales have also dropped from last year by 35.3 percent, an estimated 629,000 homes were sold last November.
Markets Fall on Tuesday
A thinly-traded session on Tuesday saw stocks fall, as mixed news on the housing market and concerns on fourth-quarter corporate earnings and falling oil prices weighed down news of a brighter outlook of consumer sentiment. The Dow Jones industrial average and other major indexes all posted declines. Trading is expected to volatile the rest of the week; the markets will close early today and won't reopen until after Christmas.
The bright spot in the news was the University of Michigan's consumer sentiment index, which was unexpectedly revised higher to a reading of 60.1 from the 59.1 of a Dec. 12 reading. Economists had forecast a reading of 58.6. A record drop in inflation expectations by consumers polled may be offset in future by rising unemployment and weak economic results.
Consumer Financial Company Gets $2.33 Billion
Commercial financial firm CIT Group says it has received approval to get $2.33 billion from the $700 billion bailout of banks. CIT Group on Tuesday also got government approval to become a bank holding company.
CIT had been working over the last months to raise enough money to qualify to become a bank holding company. It joins other companies that have recently become bank holding companies, including Goldman Sachs Group Inc., Morgan Stanley and American Express Co. The ongoing credit crisis has cut off many funding avenues for financial companies. By becoming a bank holding company, this allows CIT to get access to government lending programs and build large deposit bases to bolster its operations. CIT will give Treasury preferred stocks and warrants to purchase common stock in return for the $2.33 billion.
Many financial institutions were hit by a dramatic increase in mortgage defaults and the drought in credit. Banks have been wary of lending to each other and customers in fear that they would suffer further losses.