According to the National Association of Realtors’ Pending Home Sales Index, pending home sales dropped 2.6 percent from May to June, falling to a level of 75.7. This number is down 18.6 percent from June 2009.
Lawrence Yun, chief economist and head optimist for the NAR said:
“There could be a couple of additional months of slow home-sales activity before picking up later in the year, provided the job market continues to improve. Over the short term, inventory will look high relative to home sales. However, since home prices have come down to fundamentally justifiable levels, there isn’t likely to be any meaninful change to national home values. Some local markets continue to show strengthening prices”.
Yun added that mortgage rates will remain historically low and that there will be modest growth in the labor markets. Yun’s assertion that there isn’t likely to be any meaningful change to home values runs totally counter to almost every single report I have seen on this topic. Last week Fiserv said they expect home prices to drop about 5 percent on average next year. Altos Research made similar claims. A quick search on your google machine will turn up many other sources that say similar things.
According to the great blog Calculated Risk, this is a record low for the Pending Home Sales Index, which began in 2001.
A decrease in home sales and home prices should come as a surprise to absolutely nobody who has been paying attention. There are really two factors in play here. One is the expiration of the first time home buyer tax credit at the end of April. The tax credit served to accelerate home sales from the summer and fall into the spring. The resulting current lack of demand is predictably putting downward pressure on home prices. Additionally, the enormous excess supply of homes on the market (both distressed and otherwise) is also putting downward pressure on prices.
For these reasons, and the continuing soft labor market (which isn’t showing many signs of life), I cannot share Lawrence Yun’s optimism that there will not be meaningful change to national home values. What do you think? Let me know in the comments below.
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