Update1 Home Sales Down in May: Saw That One Comingby Tim Manni
Update1: May’s new-home sales report added to the concerns of industry insiders and experts alike in a major way. The record-setting drop of almost 33% last month was, like the existing-sales report (see below), a surprise to some analysts. While the overall opinion was that sales were going to falloff after the tax credit was through, the abrupt and massive nature of the decline was the bigger shock:
“No two ways about it, these figures were just awful, when you look at the magnitude of the decline,” said Michael D. Larson, a housing and interest rate analyst for Weiss Research. “Obviously we were all expecting some kind of hangover impact, but this is like what you would have on New Year’s Day.”
Original post: Existing-home sales fell by 2.2% in May after an increase of 7.6% in April and 7% in March. Some analysts seem surprised by May’s numbers:
Economists surveyed by MarketWatch were expecting sales to rise about 6% to a 6.11 annual rate, theorizing that the expiration of the tax credit at the end of June would force some buyers to rush ahead.
It came as no surprise to us that existing-home sales didn’t just plateau but dropped in May. Perhaps the bigger surprise to us was that some economists actually expected home sales to rise. The very reason we knew the sales numbers wouldn’t increase was actually the very reason some economists thought they would.
It stood to reason, and now May’s existing numbers prove it, that the rules of the homebuyer tax credit (stating that all contracts must be signed before April 30) would move up demand just prior to the deadline. Translation: the bulk of the home sales we expected to see, at least through the second quarter, will have peaked in April. And so far it appears they have.
Back in March, Lawrence Yun, chief economist for the National Association of Realtors (NAR) gave a very interesting forecast:
“We would anticipate that April, May, June home sales figures will be high if there is a similar buying pattern as last year,” said Lawrence Yun, chief economist for NAR. But so far the extension of tax credit by Congress has generated only a modest increase in foot traffic, he told reporters. And the expansion of the tax credit to existing homeowners or repeat buyers has not generated much excitement either. “Right now there is nothing to indicate we will get that 40% kick” in May or June, Mr. Yun said. “But we are keeping our fingers crossed.”
Don’t expect the (still pending) extension of the homebuyer tax credit’s closing deadline to keep home sales afloat until the credit’s (pending) September ending date either. Why? All those borrowers are already in the system as they already have signed contracts.
READERS: With little to no chance of the homebuyer tax credit receiving another new extension, and since June is homeownership month, we want to know: do any of you plan to buy a home in the near future? If not, what’s stopping you?