This summer is really not a great season for those who are interested in purchasing their own homes. Just last month — June — existing home sales took a plunge into the abyss, which is a good indicator our economy is now swirling around at the bottom of the toilet bowl and could be about to get flushed down the drain. Well, that slowdown was confirmed by a sizable drop in the sale of brand new homes, as they went down by 0.6 percent MoM, which is below the 3.4 percent MoM that was initially expected.
According to ZeroHedge, it also experienced a downward revision back in May of -11.3 percent MoM to -14.9 percent MoM.
That shift dragged the new home sales SAAR down to 617k – basically unchanged since 2016…
While the median new home price rose in June, it remains below the median existing home price…
It appears the homebuilder subsidy fad is wearing off as mortgage rates show no signs of easing significantly…
And this, of course, has caused homebuyer confidence to tank to an all-time record low. That absolutely makes sense, right? If the market looks horrible, people are going to think twice about purchasing a home, especially a new one, which is more expensive than one that previously existed.
You might be wondering what kind of impact the housing market has on the overall health of the economy. It has a huge impact and is a great indicator of whether or not things are going well or are headed for disaster.
According to Economics Help, “Rising house prices, generally encourage consumer spending and lead to higher economic growth – due to the wealth effect. A sharp drop in house prices adversely affects consumer confidence, and construction and leads to lower economic growth. (falling house prices can contribute to economic recession). Rising house prices can also redistribute wealth within an economy – increasing the wealth of homeowners (primarily older people), but reducing effective living standards for those who do not own a house (often the young).”
Increase in equity withdrawal. A rise in house prices enables homeowners to take out a bigger mortgage. Banks can lend more on the basis of the increased price of the house. Households could use this bigger loan to spend on other items. This can create a significant increase in consumer spending. For example, in 2006, with rising house prices, equity withdrawal added an extra £14bn to consumer spending. In 2008, with falling house prices, equity withdrawal was -£7bn. (people taking the opportunity to pay off the mortgage)
When the price of housing goes up naturally in a market, it ultimately will create wealth for those who own houses. This translates into consumers being far more confident when it comes time to either spend some money or borrow it via credit cards.
The bottom line here is that the decrease in housing sales is a sign our economy is fragile and could potentially be on the verge of death. Which is why it is critical to start preparing for the worst-case scenario, which is societal collapse. If our economy gets flushed down the toilet by some sort of emergency situation (war or even severe weather event) we need to make sure we have supplies that will enable us to survive, such as plenty of food, first aid, and some kind of plan in place for finding shelter if the home itself should be destroyed or damaged.
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