Figures released on August 24 on the housing market in the United States reveal that further tough times lie ahead for the ailing US economy. Existing home sales in the US fell 27.2% in July – the biggest drop in one month in the home sales market in the last four decades and the lowest number of sales since 1999.

The oversupply of homes in the market is in part driven by foreclosures on debt-ridden home owners, but also a result of the high level of unemployment. The number of previously owned homes for sale in the US has risen to 3.98 million. At the current rate of sales, it would take over a year for all of them to sell.

Even though mortgage rates in the US are at record lows and banks are relaxing credit and offering easier refinancing, increasing numbers of workers in the US cannot afford the repayments or escape the debt treadmill. Foreclosures and takeovers of homes by banks in the US hit 1.1 million in March, a 20% rise from 2009.

The Wall Street Journal noted on August 24: “The steep decline in sales in July reflects both a souring in the U.S. economic recovery and the expiration of a government tax credit program that has been supporting the housing market for more than a year. The tax credits offered certain buyers up to $8,000 to sign a contract ... the tax credit’s expiration drove pending home sales down 30% in May and caused a double-digit dive in mortgage application volumes even as interest rates hovered near their lowest levels in generations.”

With unemployment at around 10% – or some 14.6 million people – this is hardly surprising. The number of long-term welfare recipients and people seeking emergency welfare payments continues to rise. Over the last year, the number of unemployed claiming the federal emergency unemployment compensation increased by a hefty 60%.

While the economic outlook here in Australia is not as gloomy as in the US, the news of the slump in the US homes market caused a ripple of concern in the Australian financial sector and investors. “The Australian market as usual is a slave to Wall Street”, as one market analyst put it in the August 25 Sydney Morning Herald, adding: “They [financial speculators here] got a fright with the housing figures in America, and that upset the market mightily.

“There’s a lot of talk about double dip recession, there’s a lot of talk about deflation ... and the market doesn’t like it.”

While uncertainty remains about how deep and severe the next economic crisis will be, one thing is certain – as with the last crisis triggered in 2008, the brunt of the burden will be borne by working people and the oppressed the world over. Direct Action believes that we can resist the attacks on working people that are bound to come with global capitalism’s next stumble. We need your help to keep the paper in production and play a part in helping to build a movement for fundamental change and solidarity, for socialism of the 21st century. Please consider making a donation to the Direct Action fund appeal and help us reach our $35,000 target. So far we have raised $18,532 thanks to our supporters. You can make a donation by sending a cheque or money order to Direct Action, Suite 72, 65 Myrtle Street, Chippendale NSW 2008.