Pending home sales nosedive dramatically after tax credit expiration

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.