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.
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
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.
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.
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.
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.
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.
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.”
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.
property in alanya
July 5, 2010 at 5:36 am
good article. thanks
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.