Last month, house sales rose in America. According to the Commerce Department’s figures, sales of single-family homes rose by 2.4% in July to a seasonally-adjusted rate of 515,000, from 503,000 in June. “It’s a good sign. It’s probably price-driven. This is the first step in an improvement in housing,” says Dresdner Kleinwort economist Dana Saporta in The Daily Telegraph. But it’s not time to go shopping for a McMansion – the crash is far from over. The rise in sales is due to a surge in the number of foreclosures (one million homes are currently in the process of being repossessed), which bargain hunters then snap up. But these sales do not reflect the broader market, and in fact help to drive prices lower.
Mortgage approvals are at an eight-year low, with application volumes down 77% from the May 2003 peak. With banks maintaining strict lending criteria and the cost of living rising, Joe Average still can’t get, or afford, a home loan. So prices have further to fall. “Today’s challenging economic environment suggests the housing market is far from stabilising,” says Richard Syron, chief executive of Freddie Mac, in The Guardian.
And while you may be tempted to jump on a Foreclosure Bus Tour – they’re doing big business taking people round the cheapest homes on the market – remember, there is a reason these homes are so cheap. A foreclosed home in Detroit sold for $1 last month, but looters had made off with everything they could – including the plumbing. To profit from foreclosures you need to be local. That way you know the area – is it a slum, or will it eventually recover? – and you can keep an eye on your purchase while it is restored to living condition. For those just hoping to bag a holiday home, the wait isn’t over. But keep a close eye on where you want to buy. The crash isn’t history, but America will bottom out before Britain does.