[The following article launches a major new series from Sneaky Business examining the state of the US housing market]
The release of a key report Friday confirmed the scale of the crisis engulfing the US housing market. Derek Martin of the Homebuilders and Remodelers Association (HRA) confirmed the worst, "The market ran off the rails last year, moved into a prolonged skid and has now hit a brick wall. Sales fell to a trickle in June and then actually stopped for most of July."
As sales ossified, Dayton resident Peter Benedict became the only person to complete a home purchase during the month. "I knew things were tight" responded Benedict, "but I had no idea how important my purchase would be". Area builder Beaston Homes threw in a long list of incentives to win the deal, including a 30% price reduction, a hot tub and the adjoining house for free. "To be honest we don't really need the second house" continued Benedict, "But Beaston insisted on it".
The slow-down in housing has been more wide spread and prolonged than many in the industry had predicted. Jitters in the sub-prime market, a tightening of mortgage approvals to the under eighteens and a reluctance to grant home equity loans for "tasteless" renovations have weakened the market considerably.
News of Benedict's purchase propelled housing stocks upwards. "This is the turning point" declared Leeward Stochs analyst Jennifer Lee, "The housing market can start rebuilding momentum now". Word that Benedict may have already lined up a buyer for his free home energized stocks even further.
However, talk of a rebound may be premature. Sneaky Business has learned that further sales may be hard to come by. "There is still a chance that the market will move into negative territory during August" stated Martin of the HRA, "Builders may start paying prospective owners to move into their homes. And some have threatened to start tearing down houses under construction".
Keep reading Sneaky Business for more up to date analysis of the slump in housing.
[The next article in this series will be released during Fall 2008]