Existing home sales
Each month, the National Association of Realtors (NAR) measures existing home sales which indicate transactions that closed on resale homes. With the home buyer tax credit incentive expired on April 30th, the real estate sector is looking closely at economic indicators and keeping tabs on the pulse of the aftermath of doing without the tax credit.
According to NAR, “existing-home sales remained at elevated levels in May on buyer response to the tax credit, characterized by stabilizing home prices and historically low mortgage interest rates,” having declined nationally by 2.2% between April and May. After experiencing a 7.6% rise in April compared to March, May’s numbers are not alarming despite a small dip, especially given that existing home sales are up nearly 20% over May of 2009.
Some had forecasted a major drop in activity in May after the April 30 tax credit expiration, but closings will still be impacted through the summer, so the breath holding isn’t quite over.
Home prices
According to the FHFA, home prices rose a marginal 0.8% from March to April after a 0.1% increase in March. Although it is a regularly referenced index, the FHFA home price index is not a complete picture however, as it is calculated based on purchase prices of homes backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac.
Although existing home sales are doing relatively well, looking to home price indices as an economic indicator won’t prove to excite or motivate the industry, given that home prices have fallen 1.5% nationally in the last 12 months (ending in April) but more importantly have fallen 12.8% from the real estate sector’s peak in April 2007.
Some note that home prices dipping a bit is good news as it is motivating to buyers, while others note that this is part of the overall cycle and that prices were over inflated to begin with. Given that home sales are still strong, do you think a dip in home prices is good news or bad news?
CC Licensed image courtesy of heather_joy via Flickr.com.
