The ‘new normal’ for investors may be morphing into the new desperation for just about everyone and everything else.
Today, the Census Bureau reported that just 30,000 homes sold last month — the weakest June in history. On a seasonally adjusted annualized basis, June set the second lowest rate in nearly 50 years of record-keeping at 330,000. May holds the record for the lowest at 267,000.
It’s hard to believe that things are getting worse in housing; much of 2009 was so miserable. For a while, thanks to the tax credit for homebuyers, the residential market began to turn up from its lows. The tax credit expired at the end of April, so some are arguing/hoping that the dip is only temporary. Before you know it, buyers will re-emerge and help nudge along the recovery. Maybe. But I suspect my recent experience in the Pocono Mountains in northeastern Pennsylvania is a harbinger of more trouble ahead.
The region is an inexpensive vacation haven for residents in the Northeast and MidAtlantic states. We were there for the second year in a row for a weekend of R&R and to visit my older son in sleepaway camp. Last year, the weak housing market shouted from every corner and every publication. “Reduced!” home sale signs were everywhere. The 2009 edition of the Pocono Real Estate Guide promised every manner of discounts. “BETTER VALUES!” screamed one ad which promised buyers they would “SAVE $12,000” — $6,000 in closing costs to be paid by the builder and $6,000 in LUXURY UPGRADES. I wasn’t too surprised.
This year, I found the changes a bit of a shock. The July 2010 edition seemed even more desperate. “Bring In This Ad/Get $5,000 In Free Upgrades!” The biggest coupon I had ever clipped in my life was for $5.00.
Builders are even offering to fill the shoes of Uncle Sam. Missed out on the tax credit for homebuyers? “Every qualified buyer gets our summer $8,000 bonus!” announces another ad.
The guide itself is flimsier — newsprint only. Last year’s edition had a glossy cover and only a photo of an elegant looking bedroom. This year’s has a borderline shlock quality: Get your bargains while they last. Only 3.5% down. “Ask for Leon. See Our Ad Inside!” Yeah, I’ll ask for Leon.
Also new this year: Two prominent half-page ads offering foreclosures. “Call for list.” In other words, there’s more where that came from.
Last year the economy seemed weak, but not desperate. Demand for vacation accommodations of all sorts seemed pretty strong. It made sense to me. The Poconos are pretty downscale compared to Nantucket or the Hamptons. For years they were the butt of jokes, a low-class getaway for honeymooners who had a taste for heart-shaped whirlpools and mirrored ceilings. But it’s also a lovely area for families with verdant mountains, lakes galore, the Delaware River gap and the amusements of small town life. Both last year and this year we stayed in simple cottages on a private lake. To our surprise, this year the season was far from booked. In fact, the owners told us that families kept calling to say they wouldn’t be showing up after all. They had lost their jobs. These were people who reserved a year in advance and who typically return year, after year, after year.
The effects of cancellations like these are rippling through the four main counties in the Poconos. The jobless rate in June is up year-over-year, rising to 11.2% in Carbon from 10.0%; to 10.4% from 9.3% in both Monroe and Pike; to 7.8% from 7.2% in Wayne, the only counting besting the national jobless rate of 9.5%.
You’ll probably read that the June home sale numbers mark a big improvement when compared to May, up 23.5%. True. And that the inventory of new homes fell. Also true. But consider this: June home sales are still 16.7% below the 2009 June number. So is this a new bottom or new trouble? I don’t know. But I couldn’t help noticing that in both 2009 and 2010, the inside front cover of the Pocono Real Estate Guide featured families, both with two young kids, obviously chomping at the bit to move into a home framed nearby — a 4-bedroom house with vaulted ceilings and central heat and a/c. But the families today are different. The house remains the same — down to the trees in front. Which made me wonder: What happened to last year’s family? Did they move? Did they default? What other options did they have?