More Bad Economic News: Existing Home Sales Take Biggest Fall In 40 Years

Increasingly, if the Democrats want to analyze why they are now sinking in the polls (and votes) you get back to the old slogan: “It’s the economy, stupid.” And the latest economic news is grim, indeed:

Existing-home sales took their biggest tumble in at least 40 years last month as the impact of a buying spree spurred by a tax credit for first-time buyers waned, according to industry data released Monday.

Buyers who rushed to meet the original November deadline to take advantage of a $8,000 tax credit for first-time home buyers caused a surge in sales earlier in the year but left the market wobbly by the end of 2009. First-time buyers, who had made up more than 50 percent of sales earlier this year, were only 43 percent of the market in December. The shift also resulted in fewer sales of lower-cost homes, which first-time buyers typically seek.

After three months of increases, sales of existing homes, including condos and single-family residences, fell 16.7 percent to a seasonally adjusted annual rate of 5.45 million in December compared with the previous month, according to National Association of Realtors data. That was a bigger drop than analysts had expected and the lowest sales rate since August. It was also the biggest monthly decrease on records than begin in 1968, according to the industry group.

The December decline “was payback for the tax credit,” said Patrick Newport, an economist for IHS Global Insight.

Bloomberg adds:

First-time buyers rushed to complete deals before the $8,000 government incentive was due to end, pushing sales up 28 percent in the three months to November. The subsequent extension and expansion of the credit to include closings through June signal demand will strengthen in the first half of 2010, while raising the risk the market will then slow anew should jobs remain scarce.

“We’ll see a pickup in existing home sales in the next couple of months,” said Adam York, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who forecast a 5.4 million sales pace. Although “we’re past the bottom,” he said, “I don’t think there’s going to be a lot of buyers out there looking for a home outside of the tax-induced effects until they feel more comfortable with the labor market.”

Stocks trimmed earlier gains following the report. The Standard & Poor’s 500 Index was up 0.5 percent to 1,097.66 at 12:01 p.m. in New York. The S&P Supercomposite Homebuilder Index was down 0.6 percent.

It’s bad news such as this, and steadily discouraging news on the jobs front, that lead to poll results such as this:

Nearly three out of four Americans think that at least half of the money spent in the federal stimulus plan has been wasted, according to a new national poll.

A CNN/Opinion Research Corporation survey released Monday morning also indicates that 63 percent of the public feels that projects in the plan were included for purely political reasons and will have no economic benefit, with 36 percent saying those projects will benefit the economy.

Twenty-one percent of people questioned in the poll say nearly all the money in the stimulus has been wasted, with 24 percent feeling that most money has been wasted and another 29 percent saying that about half has been wasted. Twenty-one percent say that only a little has been wasted and 4 percent feel that no stimulus dollars have been wasted.

“One reason why the economic stimulus bill is no longer popular with the American public is the perception that a lot of the money has been wasted. Six in ten believe that the projects in the stimulus bill were included for purely political reasons,” says CNN Polling Director Keating Holland. “Nearly three quarters believe that at least half the stimulus money spent so far has been wasted, and one in five say nearly all of it has been a waste.”

One reason why people may perceive it’s wasted: because such perceptions (fed by the talk show radio political narrative which had the money wasted before it was even signed into law) are not being countered the news stories that suggest that the economy is steadily on the mend. This could change — but until it does Democrats now “own” the existing economy in the minds of many, no matter what contributions the Bush administration made to the current state of it. And until there are changes, the Democrats’ battle will be increasingly tough…

  • SteveCan

    “One reason why people may perceive it’s wasted:”

    It's not just the perception … “we” aren't seeing the results of the stimulus in any meaningful way.

  • Schadenfreude_lives

    Nearly three out of four Americans think that at least half of the money spent in the federal stimulus plan has been wasted, according to a new national poll.

    I wonder how much if the public is aware that less than 30% of the $800B has been spent, and of that, the majority of dollars have gone to one-time events (like buying new computers), not job-creating and economic development.

  • ProfElwood

    You mean, banks aren't the drivers for our economy? How shocking!

  • Jim_Satterfield

    People apparently can't appreciate the fact that it could have been much worse than it is if the stimulus hadn't existed.

  • Schadenfreude_lives

    People apparently can't appreciate the fact that it could have been much worse than it is if the stimulus hadn't existed

    Nope. You cannot get away with that one.

    Obama provided all kinds of charts and projections with/without the stimulus about unemployment, national debt, revenues, etc. Every one of them showed what would happen if nothing was done, and what the stimulus would do to improve the results and by how much.

    But the reality is that every single one of those indicators are way worse than if we did nothing. It appears we would have been better if we had done nothing, or at least not that God-awful fake stimulus bill.

  • shannonlee

    That was my biggest complaint about the bill. So much money on the back end and so little for immediate help. It made no sense whatsoever. They should have spent a lot in the beginning and then should have been required to pass another stimulus package a year later if it was needed. There was no good reason to load so much funding on the back end. It made the entire bill appear very suspicious.

    What really upset me is how they tried to hide the fact on the Sunday morning talk shows. As if I need another reason not to trust them.

  • RTTX

    I think it becomes a question of how you're willing to measure growth. Supposedly, home sales went up 5% in the calendar year: http://www.newsy.com/videos/existing-home-sales

    Is the market at least reaching a point where we can consider it close to “the right direction” though?