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Existing home sales and prices dip this year – good news or bad?

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.

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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.

Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

13 Comments

13 Comments

  1. Joe

    June 22, 2010 at 5:00 pm

    “Existing home sales and prices dip this year – good news or bad?”

    Wellll, depends on whether you are a buyer or a seller, eh! 🙂

  2. Dunes

    June 22, 2010 at 9:03 pm

    If you add this to the Pot..

    Traffic to real estate sites down 24%… inman.com/news/2010/06/22/social-networking-sites-gobble-more-traffic

    Maybe it depends on if you are an Agent, eh!

  3. King Of Homes

    June 22, 2010 at 9:38 pm

    EVERYTHING NOW DAYS IS TIED TO AFFORDABILITY.

    When the banks decides enough is enough they will start raising interest rates. If the government does not have their act together BEFORE the rate adjustment then our industry and the country along with it will be in ruins.

    FHA needs to do a 40 and 50 year loan option NOW so payments will be more affordable and obtainable in the future when the banks DO make thier move. (REMEMBER the banks will not raise interest rates until the FED does and the Federal Government has a great influence on when this will happen.)

    Only when we are able to have the interest rates back to more reasonable place and stability in home prices will we truly be on the road to recovery. EVERYTHING NOW DAYS IS TIED TO AFFORDABILITY.

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