Economy Watch: New Homes Sales Back in the Cellar

By Dees Stribling, Contributing Editor

The economic tumult of spring and summer have apparently discouraged Americans from buying new homes—discouraged them even more than they already were, that is. According to the U.S. Census Bureau on Tuesday, new home sales in July sold at an annualized rate of 298,000, a drop of 0.7 percent from June.

If that annualized rate were to translate into an actual annual sales total, and there’s some chance that it will, it would be the lowest total since the government took an interest in counting new home sales, back when the average nominal cost of a new house was $12,650 (in 1963, when the U.S. average annual income was about $5,800). Still, July’s numbers were 6.8 percent higher than the same month in 2010, which was during the crushing aftermath of the expiration of the new homebuyer tax credit.

The median price for a new home is now about $222,000, about 6 percent less than a year ago. Except for the most luxurious of the luxury-class product, new homes can’t compete even at current prices with the bargains available due to short sales and foreclosures. At the present-day glacial pace of sales, today’s stock of new housing would take about six months to sell off. This would be considered a healthy total in normal times, but “normal times” are now only a distant dream in the housing market.

FDIC says banks hold fewer non-current real estate loans

The Federal Deposit Insurance Corp. reported on Tuesday in its Quarterly Banking Profile that the number of problem banks declined during the second quarter of 2011, which was the first quarterly decline since 3Q06. At the end of the second quarter of this year, there were 865 problem institutions, down from 888 at the end of the first quarter.

According to the FDIC, “problem banks” are those with financial, operational or managerial weaknesses “that threaten their viability.” None of the banks in such trouble are named by the FDIC until they actually fail and are seized or merged into a healthier bank. “Banks have continued to make gradual but steady progress in recovering from the financial market turmoil and severe recession that unfolded from 2007 through 2009,” Martin Gruenberg, the FDIC’s acting chairman, said in a cautiously optimistic statement on Tuesday.

The Quarterly Banking Profile also reported that at the end of June, member banks reported $319.8 billion in noncurrent loans—those 90 days or more past due or in nonaccrual status—which was 6.5 percent less than at the end of the first quarter. The decline in noncurrent balances in the second quarter was led by a 3.9 percent reduction in noncurrent one- to four-unit family residential real estate loans, and by a 12.8 percent reduction in noncurrent real estate construction and development loans.

Judges refuses to let FDIC off hook for WaMu loans

In other news related to the FDIC, Judge Rosemary Collyer of Federal District Court for the District of Columbia refused on Tuesday to dismiss a $10 billion suit brought by Deutsche Bank National Trust Co. over bum mortgages securitized once upon a time by Washington Mutual. The Office of Thrift Management seized WaMu at the height of the Panic of 2008.

The FDIC, which was appointed receiver, sold WaMu to JPMorgan Chase. In asking the judge to dismiss the case, the FDIC implied that Deutsche Bank should look to JPMorgan for satisfaction. Meanwhile, JPMorgan said that it isn’t responsible for WaMu’s chicanery. The judge has thus far disagreed with both the FDIC and JPMorgan, refusing to dismiss either of them from the lawsuit.

Despite the literal quaking under their feet on Tuesday, Wall Street investors drove the equities markets higher by the end of the trading day. The Dow Jones Industrial Average gained 322.11 points, or 2.97 percent, while the S&P 500 was up 3.43 percent and the Nasdaq jumped a whopping 4.29 percent. But the way the markets have been lately, it might only take a few financial aftershocks to drop the averages again.