Last week, we had disastrous reports on the housing market that were precipitated by the $8,000 first time home buyers credit. US existing home sales fell 27.2% and US new home sales fell 12.4% as buyers had moved forward their purchases. RealtyTrac reported that home foreclosures rose 4% in July to 325,229. Housing prices appear to have stabilized as the S&P CaseShiller index rose for June, but that was still under the influence of the tax credit. July/August could be ugly. We are not sure to what level housing sales will eventually gravitate towards, but the adjustment process is stomach churning.
The adjustment process to find that level is ongoing and the housing affordability index is reaching new highs. This is a very helpful development and Robert Shiller believes we may only have another 10% of downside risk in housing prices.