Sorry about all the housing posts lately- but it’s too darn fascinating right now. Besides, I think most people are interested in what is happening in housing right now (as most of us own our homes so we have a vested interest.)

The housing data keeps coming in and most of it is, how do I say it delicately, not good. Housing sales numbers for June for existing homes were recently released and most of them were much lower than a year ago. The national numbers showed sales slowing to their lowest level since November 2002. From the Chicago Tribune:

June’s 11.4 percent year-over-year sales drop was the fourth consecutive month of decline, according to data released Wednesday by the National Association of Realtors.

But if we’re back to 2002 sales data- what’s wrong with that? Isn’t that just returning to a “normal” market?

Yes and no. The problem with returning to 2002 sales levels is that the builders are still building like it’s 2005. Inventory is soaring. Take Chicago, for example. From the Chicago Tribune:

“There seems to be a disconnect now,” said Terry Semmens, Chicago district director for ZipRealty Inc. “We’re showing lots of homes and our agents are busy, but it hasn’t correlated [with transactions] as it has in the past.”

Semmens said the supply of homes for sale in the Chicago region rose 3.6 percent in June, reaching a level 30.6 percent higher than the year before. He also said 37 percent of homes for sale had reduced their price at least once, up from 35.4 percent at the end of May.

Chicago home sales were down 20% in June from a year ago. June is the end of the “peak” selling season in the Chicago area.

The new home developers are only just beginning to see the fallout. In the suburbs of Chicago, developers are trying to move new home inventory to no avail. I personally have been following a new construction McMansion home in west suburban Downers Grove that has been on the market for two summers now. It’s had a slight price reduction from $889,000 to $859,000. It was built by a local developer (the kind that builds maybe two or three homes a year.) Not sure how long that guy is going to be in business if he’s carrying the McMansion house for two years. We’re going to see bankruptcies going forward.

He’s not the only one who his hurting. This housing bust is beginning to take out long established real estate developers- including those who should have known better. From Crain’s Chicago Business:

The slump so far has landed at least one homebuilder in Bankruptcy Court: Burnside Construction Co., a Downers Grove-based company that has built more than 28,000 homes since it was founded in 1911. In early May, Burnside filed a Chapter 7 petition in U.S. Bankruptcy Court in Chicago.

“Projects didn’t go as anticipated. Nobody was buying,” says Kent Gaertner, the company’s attorney. “It’s as simple as that.”

Yep. It’s as simple as that. No buyers- no sales.

Sad for a company that is nearly 100 years old. Think about all of the housing markets that company has survived - including the Great Depression. But not this one.

Take a look at some of the new housing numbers coming out of Chicago. Does this seem “normal” to you? Also from Crain’s:

Developers sold 1,192 homes in the quarter, a 24% drop from second-quarter 2006, according to Tracy Cross. Still, on a seasonally adjusted annual basis, city sales are roughly equal to 2003 levels.

A growing glut of condominiums, however, could delay any recovery. Tracy Cross is tracking 172 active condo and townhome projects in the greater downtown area with a combined 7,814 unsold units. Mr. Cross estimates that two-thirds of the projects are under construction and will open up in the next 12 to 18 months.

Unless demand picks up, some developers could get caught with unsold units, eating into their profit or even preventing them from paying off their construction loans.

“It’s going to bring the strongest (developers) to the fore, and the weakest will really drop,” Mr. Cross says.

Right now, Chicago and many other markets have fallen back to 2002 or 2003 levels. The real truth about a “bust” will be revealed in the next few months. There are going to be lots of frustrated homeowners come this fall and winter (who cannot sell.)

Stay tuned.