By: Dr. Mike Campbell
America has just celebrated its Thanksgiving holiday and that is traditionally seen (in commercial terms at any rate) as the start of the festive season. Every year, may consumers spend more than they can afford at this time of year (even in the good times) and since domestic expenditure accounts for roughly 70% of American GDP, it is always a critical time for retail businesses. This year, figures reveal that US Thanksgiving period expenditure was up by 16% on last year’s figure. The Thanksgiving weekend retail sales figures came in at a whopping $52.4 billion (this works out at something like $250 per person living in the USA).
October also saw a rise in new home sales although the house price has fallen back. There was a 1.3% rise in house sales which equates to a seasonally adjusted annual figure of 307000 homes. The new homes figure is important since construction is a key sector of the US economy. Whilst the rise is good news, analysts estimate that it is well under half of the level needed to sustain a recovery; a figure they put at 70000 new homes.
The average house price weakened by 0.5% and now stands at $212300 – the figure compares to an average value of $314600 in January 2007. These figures show that the house price has undergone a serious readjustment since the onset of the global financial crisis. Whilst this is good news for people hoping to join the housing ladder, for some, it means that their home is worth less than the mortgage securing it.
Sales of existing housing stock remain sluggish. The October figure came in at an annualised rate of 4.97 million units; however, the level typical of a buoyant housing market is 6 million. This means that it is harder to sell a house in the current climate and this leads to price depression as people desperate to sell must drop their prices to attract a buyer.