Punchinello’s Chronicles

August 22, 2009

Rising Home Sales News

Filed under: Butterfly Wings — Punchinello @ 2:56 pm
Tags: ,

The story tells us that the recession may be bottoming out because there’s been an increase in the number of homes sold. But when you read the story fully, you find out that there’s also been an increase in the number of homes being put on the market. Realtors guess (operative word) that this “may” mean more people are gaining confidence and willing to test the market by listing their homes.

The theory is that people have waited to list their homes due to dropping prices. Now, with prices supposedly stabilizing, here come the listings. The down side is that this may also mean a backlog of inventory as many homes enter the market, collapsing the “green shoots.”

What about credit-card debt?

Many people, particularly homeowners in good standing, have credit cards with high limits. They also have multiple cards. As those people lose their jobs in rising unemployment conditions, what do they do? Typically, they start using credit cards to cover various shortfalls. Exactly like the US government uses the Federal Reserve.

But as unemployment continues, those people use more and more of their credit. The debt increases, and suddenly they can barely afford the minimum payments. Soon, as they realize they’re not going to get a new job and new income, they realize they must sell their home. It’s not a choice, it’s a necessity.

It’s just as likely that the surge in new listings results from a 9-month postponement. Many people haven’t been able to believe that they lost a job and haven’t been able to get a new one right away. They’ve been denying that reality and have been using credit cards to maintain a subsistence-level budget. And now those huge credit limits have been maxed out.

That’s why consumer spending has stopped or slowed. It isn’t because consumers are cautious and are saving money. The numbers should begin to show this with back-to-school sales, and of course, the 2009 Christmas shopping season.

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