The Cash for Clunkers Program seems to be working…the kind of clunker you can live in.

For the fifth consecutive month, the number of signed contracts was higher than the previous month – this figure is seasonally adjusted so the increases are not due to the spring uptick.

NAR does not share it’s sample size and therefore why they present this metric as an index so I am always wary of a data set we don’t know the size of. Contract data is less prevalent than closed sales across the markets they cover so its a non-random sample by definition and therefore full disclosure is needed. But still…

The results are encouraging and supports the concept that if homes are priced correctly, they will actually sell. Buyers are out there.

I suspect a portion of the increase is a combination of the release of pent-up demand that caused people to freeze in their tracks at the end of last year, plus record low mortgage rates, lower home prices and the coming expiration of the $8k tax credit all played a part.

My concern is that the pace of foreclosures is expected to rise and there hasn’t been a “cash for clunkers” equivalent for the housing/mortgage market.

At the same time, personal income dropped 1.3% from last year, the largest drop in 4 years.

>A weak labor market is one reason economists say a rebound in housing will be slow to develop. The unemployment rate, which reached a 25-year high of 9.5 percent in June, may exceed 10 percent by early 2010, according to the median forecast of economists surveyed by Bloomberg last month.

Housing trends are more likely to follow employment and income trends and this is good news. However, it doesn’t mean the keys has been turned in the ignition.

Still, it’s better than a “start.”


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  2. Edd Gillespie August 5, 2009 at 9:50 am

    Here is the Commerce Dept press release about income and spending. Apparently the figures Bloomberg quoted were provoked, but even so Commerce says the experts are optimistic.

    Statement from ESA Under Secretary Rebecca Blank on June Personal Income
    August 4, 2009

    “The Commerce Department’s Bureau of Economic Analysis today released personal income and outlays for June 2009. Nominal personal income fell 1.3 percent, real disposable personal decreased 1.8 percent, and real personal consumption expenditures declined 0.1 percent. From the fourth quarter of last year through the second quarter of this year, real disposable personal income rose 2.1 percent at an annual rate. Real consumer spending edged down 0.3 percent in the first two quarters after falling 3.3 percent during the previous two quarters.

    During the first half of this year, stimulus dollars boosted real disposable personal income, and real consumer spending stabilized after falling rapidly during the second half of last year. The GDP numbers last week indicated that we are making progress in bringing this recession to an end. In June, special one-time payments to individuals provided by the American Recovery and Reinvestment Act of 2009 decreased substantially, but other provisions continue to benefit households. Most forecasters expect that consumer spending and the overall economy will expand in the coming months.”

    So let the critics of stimulus eat crow, but why are experts optimistic? Are they among those of us who knew something was screwed up, but didn’t know what it was or how bad it would be?

    Jonathan, keep up the cautions to appraisers about trusting secondary sources like NAR.

    Sometimes it just isn’t so and it is the appraiser’s job talk straight.

  3. Edd Gillespie August 5, 2009 at 2:08 pm

    I was in the shower and realized something doesn’t make sense here. How can personal income and unemployment be simultaneously rising? I thought people worked to get income and if there isn’t work how does the income keep on coming? If indeed personal income is independent from employment then what’s to worry?

    I’m sure there is a plausible answer to this and it might be that the right hand forgot where the left one did, or looking at the clouds from both sides. And maybe I’m just not smart enough to understand.

    Anyway, whatever the answer is how do you think it effects housing? Rising income and unemployment, that is.

  4. Jonathan J. Miller August 5, 2009 at 2:14 pm

    No, no – personal income fell for the 4th consecutive month.

  5. Edd Gillespie August 5, 2009 at 2:36 pm

    Well that is certainly symmetrical. No more thinking in the shower for me.

    I guess the answer to the housing effect question is that it will continue to resemble something akin to the devastation under a mushroom cloud.

    Since income is falling and unemployment is rising the reality of the storm continues for me. Thanks for the rescue. I was about to follow Yun into the mindless desert of denial.

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