Jul 22 2010
Property Sales See Sudden Decline
Today we are chatting about house sales, specifically national statistics. We don’t commonly care too much about national figures. It is critical that you go look at your area numbers because real estate is a local business. However, sometimes the statistics are so hard to believe that they need to be brought to your focus.
According to the National Association of Realtors, pending home sales fell 30% in May from where they were in April. Granted, April was the conclusion of the tax credit deadline. So that had some effect on the situation. We don’t quite know what has happened from May to June.
Kevin and Fred were foretelling that this would occur as much as a year ago. Essentially, we have been borrowing buyers from the future. With the incentive tax credit presented by the government, plenty of people resolved to buy houses at an earlier time than they would have.
This is just like what happened in the first half of the decade. The banks were lending money to almost any person that sought it. Buyers that were not necessarily qualified or were not prepared to buy a home stepped forward and bought homes. So, in both cases, there is going to be a lag time before house sales catch up.
The largest parts of this problem are inventory and property prices. Because sales are despondent and inventory is going to multiply, prices will certainly decline.
With adjustable rate mortgages and their imminent resets, home owners will be taking a closer look at their mortgage and the home value. For a few the payment will go down, but so will the value of their property. There is a great potential for an increase in strategic default. We haven’t seen the worst of defaults, unemployment and short sales. The worst is yet to appear.
We’ve had all of this feel good news with the last few months of sales and pulling buyers from the future. We will be in a worse position from a national point of view than we ever were in 2007.
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