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Pending home sales nosedive dramatically after tax credit expiration

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Pending home sales

Everyone knew that with the expiration of the mouth watering incentive to home buyers of an $8,000 tax credit that sales would fall, and when new home sales dropped 17% in May, forecasters were surprised as to the extent the sales slipped.

But that shock was minor in comparison to the news of May’s pending home sales (contracts signed). According to the National Association of Realtors, pending home sales took a massive nosedive, dropping 30% from April.

NAR reports that pending home sales are down 15.9% over this time last year when the real estate sector was just seeing signs of hitting bottom (which points to only one direction – up).

Now what?

National Association of Realtors’ chief economist Lawrence Yun 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.”

Mortgage rates hit a historic 50 year low, so perhaps this optimistic forecast could come true, but with forecasters falling short of predicting the impact of the tax credit expiration, the jury is still out.

How do you think this news impacts the real estate sector? Is this a permanent, temporary or predictable setback?

CC Licensed image courtesy of Drake Goodman 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.

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22 Comments

22 Comments

  1. Joe Loomer

    July 2, 2010 at 7:53 am

    Seems somewhat predictable. Although I would add all markets are local. We’ve seen a dip in pendings too, but not at the 30% clip.

    Navy Chief, Navy Pride

  2. Erica Ramus

    July 2, 2010 at 1:27 pm

    Sorry but … what did they THINK was going to happen?
    Duh!

    We pulled May/June/July sales into March and April.

    • Jim Duncan

      July 5, 2010 at 10:02 am

      And probably July/August/September as well.

  3. Colleen

    July 3, 2010 at 3:41 am

    Hmm, does this surprise anyone? When the government gives the buyer $8,000 to buy a home, of course home sales will take a dive after the social experiment ends.

  4. Property Marbella

    July 3, 2010 at 1:07 pm

    Many have buy in February – April just for the extra $8,000 tax credit, so May, June and July is going to be little down. After the summer is the market more up again.

  5. Bruce Lemieux

    July 3, 2010 at 4:47 pm

    We’ve definitely seen a ‘cash for clunkers’ effect in my market. I don’t believe the credit brought significantly more buyers to the market, but it definitely brought contract activity forward for the year.

    Reporting on the Apr vs. May comparison really doesn’t tell us anything about the market. Of course contracts would be lower in May. The more revealing question is ‘how will we do for the year?’. Through the end of May, contracts are up 30% compared to this time last year in my market. I’m hopeful that 2010 will be 20% more active then 2009. We’ll need to see summer and fall contract activity to go back to normal (whatever that is) to see that happen.

  6. Tom Priester

    July 3, 2010 at 5:57 pm

    I watch the numbers very closely in my market areas and we have not experienced anything close to that. We actually had increases in the pending listing index in some areas and the largest decrease I saw was 18%. These incredible (no other way to describe them) interest rates certainly help. The upcoming numbers should be interesting here in southern Florida.

  7. Denise Hamlin

    July 3, 2010 at 7:27 pm

    Erica is spot on. We pulled the May/June/July sales into March and April. Of course we’re going to hit a bump in the road now. This however shall also pass. What we need now is a little bit of patience as we transition into what is popularly being called the “new normal.”

  8. Karen Goodman

    July 4, 2010 at 3:51 pm

    I also agree with Erica. It’s going to be a slow summer…more like what we normally see in the fall. Schools start in the 3rd week of August in my city (St. Louis), we see sales start dropping in August in a normal year, then it slows down even more for the rest of the year.

    I think it will be next spring before we see big buyer traffic again.

  9. property in alanya

    July 5, 2010 at 5:36 am

    good article. thanks

  10. istanbul property

    February 19, 2012 at 11:01 am

    I can also be agree with Erica.. It’s going to be a slow summer…more like what we normally see in the fall.

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Austin

Austin tops the list of best places to buy a home

When looking to buy a home, taking the long view is important before making such a huge investment – where are the best places to make that commitment?

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Looking at the bigger picture

(REALUOSO.COM) – Let us first express that although we are completely biased about Texas (we’re headquartered here, I personally grew up here), the data is not – Texas is the best. That’s a scientific fact. There’s a running joke in Austin that if there is a list of “best places to [anything],” we’re on it, and the joke causes eye rolls instead of humility (we’re sore winners and sore losers in this town).

That said, SelfStorage.com dug into the data and determined that the top 12 places to buy a home are currently Texas and North Carolina (and Portland, I guess you’re okay too or whatever).

They examined the nerdiest of numbers from the compound annual growth rate in inflation-adjusted GDP to cost premium, affordability, taxes, job growth, and housing availability.

“Buying a house is a big decision and a big commitment,” the company notes. “Although U.S. home prices have risen in the long term, the last decade has shown that path is sometimes full of twists, turns, dizzying heights and steep, abrupt falls. Today, home prices are stabilizing and increasing in most areas of the U.S.”

Click here to continue reading the list of the 12 best places to buy a home…

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Housing News

Average age of houses on the rise, so is it now better or worse to buy new?

With aging housing in America, are first-time buyers better off buying new or existing homes? The average age of a home is rising, as is the price of new housing, so a shift could be upon us.

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aging housing inventory

The average home age is higher than ever

(REALUOSO.COM) – In a survey from the Department of Housing and Urban Development American Housing Survey (AHS), the median age of homes in the United States was 35 years old. In Texas, homes are a bit younger with the median age between 19 – 29 years. The northeast has the oldest homes, with the median age between 50 – 61 years. In 1985, the median age of a home was only 23 years.

With more houses around 40 years old, the National Association of Realtors asserts that homeowners will have to undertake remodeling and renovation projects before selling unless the home is sold as-is, in which case the buyer will be responsible to update their new residence. Even homeowners who aren’t selling will need to consider remodeling for structural and aesthetic reasons.

Prices of new homes on the rise

Newer homes cost more than they used to. The price differential between new homes and older homes has increased from 10 percent traditionally to around 37 percent in 2014. This is due to rising construction costs, scarcity of lots, and a low inventory of new homes that doesn’t meet the demand.

Click here to continue reading this story…

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Housing News

Are Realtors the real loser in the fight between Zillow Group and Move, Inc.?

The last year has been one of dramatic and rapid change in the real estate tech sector, but Realtors are vulnerable, and we’re worried.

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zillow move

zillow move

Why Realtors are vulnerable to these rapid changes

(REALUOSO.COM) – Corporate warfare demands headlines in every industry, but in the real estate tech sector, a storm has been brewing for years, which in the last year has come to a head. Zillow Group and Move, Inc. (which is owned by News Corp. and operates ListHub, Realtor.com, TopProducer, and other brands) have been competing for a decade now, and the race has appeared to be an aggressive yet polite boxing match. Last year, the gloves came off, and now, they’ve drawn swords and appear to want blood.

Note: We’ll let you decide which company plays which role in the image above.

So how then, does any of this make Realtors the victims of this sword fight? Let’s get everyone up to speed, and then we’ll discuss.

1. Zillow poaches top talent, Move/NAR sues

It all started last year when the gloves came off – Move’s Chief Strategy Officer (who was also Realtor.com’s President), Errol Samuelson jumped ship and joined Zillow on the same day he phoned in his resignation without notice. He left under questionable circumstances, which has led to a lengthy legal battle (wherein Move and NAR have sued Zillow and Samuelson over allegations of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets), with the most recent motion being for contempt, which a judge granted to Move/NAR after the mysterious “Samuelson Memo” surfaced.

Salt was added to the wound when Move awarded Samuelson’s job to Move veteran, Curt Beardsley, who days after Samuelson left, also defected to Zillow. This too led to a lawsuit, with allegations including breach of contract, violation of corporations code, illegal dumping of stocks, and Move has sought restitution. These charges are extremely serious, but demanded slightly less attention than the ongoing lawsuit against Samuelson.

2. Two major media brands emerge

Last fall, the News Corp. acquisition of Move, Inc. was given the green light by the feds, and this month, Zillow finalized their acquisition of Trulia.

…Click here to continue reading this story…

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