The first time home buyer tax credit was very successful in increasing demand for homes in the spring of 2010, but the surge in demand proved to be fleeting, as home sales have collapsed since the withdrawal of the government stimulus. Despite mortgage rates that are at all-time lows, mortgage applications have been down for the last several weeks.
According to a report from the National Association of Realtors (NAR) today, the Pending Home Sales Index dropped 30 percent from April to May, and is 16 percent below May 2009.
Lawrence Yun, chief economist for the NAR said, “Consumers are rational and they rushed to meet the tax credit eligibility deadline in April. The sharp decline in contract signings in May is a natural result with similar low levels of sales activity anticipated in June. Existing-home sales that close in June will remain elevated, but we’ll then see a notable decline for July and August”.
The housing recovery still faces many headwinds, namely unemployment and an oversupply of housing. Unemployment is running close to 10 percent, and home foreclosures are at all-time highs, and neither of these trends look to be turning around in the near future.
Many analysts are predicting there will be continued downward pressure on home values for the remainder of the year. Depending upon who you believe, home prices are predicted to fall somewhere between 5 and 10 percent in the coming year.
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John
July 1, 2010 @ 8:55 pm
Housing will decline 30%, not 10%.
The “experts” got caught with their pants down.
Do not believe any realtor who tells you “Now is a good time to buy a house”
Come back in a year and see the fools who bought that line.
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