On July 20 the Illinois Association of Realtors is going to pretty much tell you what I’m telling you now: June home sales for Chicago were down 28.5% from last year. Given that the government mucked up the housing market last year with their lame Kcash For Shacks (home buyer tax credit) program this is no surprise. June 2010 home sales in Chicago skyrocketed as people scrambled to feed at the government trough before it was taken away. So this year over year decline was totally expected and, furthermore, we expect July to actually show an increase over last year just because activity died last year after the June feeding frenzy.
So a bad June comparison doesn’t exactly qualify as summer “doldrums”. What does qualify is what is going on with contract activity, a leading indicator of sales by about a month or two – the normal closing time. Look at the graph below and you will see that a) 2011 is not experiencing the normal seasonal uptick like we did in 2009 and most normal years and b) June contract activity is falling short of even 2009 (ignore 2010 because it was all dorked up), which I think may put it around 1997 activity levels.
Meanwhile, check out the trend in distressed home sales as a percentage of total sales below. That percentage has been running higher than both 2009 and 2010 all year, peaking above 50% in the early part of the year. The decline in the last few months is the normal seasonal pattern as more “normal” homes come on the market as part of the usual spring and summer selling season. One thing to note about 2010 is that the percent distressed sales in the first half of the year was depressed as a result of the incentive to get a deal done no matter what the cost but then the percent was elevated in the last half of the year as only extreme bargain hunters were left in the market.
So it looks pretty grim – for sellers and realtors at least. But as I’ll explain on Monday there is actually one bright spot out there for sellers.
The Summer Real Estate Market Is In The Doldrums
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Until the real estate market crashes to 1967 levels, the U.S. economy is screwed and all the manufacturing jobs that everyone wants back will never happen. At 55, I’ve been effectively cut out of the graphic arts market. I’m being offered jobs for $10 and hour, less than a third of what I used to make. This is happening across the board. There are quite a few guys out there my age going through the same thing, ask around.
You can’t pay someone minimum wage then turn around and charge them $1,000 a month in rent, or sell them a home for more than $20k. It’s all very simple math. My dad was making $6 an hour in 1967. Bought a house for $23,500. His mortgage was just under $200 a month. No problem.
I don’t mind being paid minimum wage, but everything else has to come down accordingly. Now I just don’t bother paying a lot of my bills. Oh well. It’s called trickle down lack of economics. It’s what happens when you screw over guys my age. Everyone below us in the economic food chain suffers.
Too bad for them.
I’ve been increasingly coming to the conclusion over the last few years that the labor market is horribly inefficient. How else do you explain such high unemployment numbers? In theory wages should come down until everyone who wants a job has a job.
There is clearly some kind of weird perception among employers that you are over the hill after 50. Not sure how they come to that conclusion but there are a ton of highly skilled people in their 50s that are underutilized and that makes no sense. Eventually smart business people will figure out how to tap into this cheap resource.