Home Grown

You have got to hand it to the good ol’ US of A—when we do something, we do it BIG. Whether it’s our big cars or our big spending, we do it up right. That’s why I am not surprised by the extent of our housing collapse—it’s not just bad, it’s horrendous. Two pieces of data this week prove what we all know—the party is not just over for real estate, it has morphed into one heck of a hangover.

Yesterday, the Commerce Department reported that sales of new US single-family homes fell 2.5% in May to a seasonally-adjusted annual rate of 512,000. New-home sales were down over 40.3% compared with a year ago and the median sales price was $231,000, down 5.7% from a year earlier. The report came on the heels of a disappointing Case-Shiller home price index, which noted that US home prices in 20 of the largest markets are now back to where they were in the summer of 2004. (Now aren’t you glad you didn’t buy in 2005 when everyone else was?) The index showed that prices have dropped a record 15.3% in the past year and are now down 17.8% from the peak two years ago. Adding to this not-too rosy report is the knowledge that with so much inventory flooding the market and foreclosures rising, prices are likely to keep falling for a while.

For those who never counted the 2003-2006 house price surge of 52% and do not have to sell their homes any time soon, this may all be moot. But we all need to care about these numbers because the data is pushing lawmakers towards legislation for which we are all going to pay. It was reported this week that Congress is about to approve a massive housing bill, including a refinancing program aimed at rescuing hundreds of thousands of homeowners in danger of foreclosure. According to the New York Times, the legislation is “the most sweeping government overhaul of mortgage financing since the New Deal.” The rescue-refinancing plan would allow distressed borrowers and their lenders to stem losses by allowing qualified owners to refinance into more affordable, 30-year fixed-rate loans with a federal guarantee. (A note here—if the homeowners are so qualified, then why are they in trouble?)

I should probably feel happier about this because it will help the economy recover. The problem is that when you were among the many who did not indulge at the frat-house party, it is a bit annoying to have to take care of those who did and are experiencing the terrible headaches and spins. I am not passing judgment on the partiers—it must have been great fun—but I wish it was not my responsibility to chip in for the Tylenol!