Never in the nearly 50 years since the United States began keeping records on sales of new homes were sales as slow as they’ve been recently.
New-home sales dropped almost 17 percent in February. Sales would almost have to triple to reach the level that economists consider “healthy,” The Associated Press reported.
Sales of existing homes offer no comfort, either. Nationwide, sales of existing homes were down nearly 10 percent from January to February.
And that’s not the worst of it: About 40 percent of the existing homes that were sold in February were either foreclosures or involved sellers accepting less from buyers than what was still owed on the homes. In addition, the median price of existing homes that were sold hit its lowest level since early 2002.
The Chattanooga area, with its bright prospects from a number of major, ongoing economic developments, fared better. While the Greater Chattanooga Association of Realtors cannot readily separate out sales of new versus existing homes, it says this part of Southeast Tennessee and Northwest Georgia saw a 15 percent increase in overall home sales from January to February.
Many parts of the country fared far worse, though. For instance, sales of new homes in the Northeast fell almost 60 percent!
These painful numbers raise questions about the heavy government intervention that helped cause the housing sector to collapse and triggered the recession and high unemployment. Prior to the housing meltdown, the federal government for years had pressured lenders to lend money to home buyers who in many cases were high credit risks. So what the government considered “fairness” trumped sound lending practices.
A lot of those shaky loans had variable rates that eventually began to tick upward, putting the monthly payments out of reach for many of the borrowers.
That caused a tidal wave of foreclosures, glutting the market with properties. Borrowers who lost their homes wound up worse off than if they had never received the loans. And the foreclosures sharply reduced the value of homes owned by people who had borrowed more responsibly.
So as home values and sales keep plunging, it’s fair to ask whether Washington has learned a lesson about not distorting the free market in pursuit of dubious social ends.
Sadly, with Washington’s continued subsidies to everything from costly ethanol to passenger rail service, it appears that lesson has yet to be learned.