You Read it First at FrumForum

Purchases of new U.S. homes probably stagnated in June, indicating housing is still languishing two years into the economic recovery, economists said before a report today.

Sales ran at a 320,000 annual pace last month after a 319,000 rate the prior month, economists surveyed by Bloomberg News forecast the Commerce Department will report. Home prices declined from a year earlier and consumer confidence fell in July to a nine-month low, other data may show.

Builders have little incentive to start projects as the prospect of more distressed properties entering the foreclosure pipeline depresses home values.

For those who may think that the housing market has bottomed out and there is a light at the end of the tunnel, think again. That isn’t a light at the end and it’s not a train coming either.  ... The first few months of 2011 offered a glimmer of hope to housing optimists that the worst was behind us. However what many failed to properly incorporate into their outlook were the basic dynamics of supply and demand.  Over the last 6 months, the nation’s housing supply has been artificially (and temporarily) held at bay by moratoriums imposed on the big servicers over foreclosure practices while buyer demand has remained relatively constant.  Econ 101 would instruct us that, under this scenario, home prices should rise.  Instead, during the same period home prices continued their decline, falling an additional 4-5% on an adjusted basis.  According to an increasingly number of economists, including Robert Schiller, we should expect to see this trend continue another 20-25% over the next several years.  Why?  Because the supply of homes expected to hit the market is more than double all of the homes sold in 2010 and YTD 2011 combined.  Large banks, private investors and the GSE’s know this and are racing to the bottom to unload their existing homes before the tsunami hits.  The GSE’s alone have nearly 300,000 houses already owned and that figure grows by thousands every month.