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TwitterThe National Association Of Realtors today released their Existing Home Sales Report for December, simultaneously ripping apart the curtain of hope for a near term economic recovery. Existing home sales tumbled to 5.45 million annual rate, an abysmal fall of 16.8%, the highest, since the last 40 years. The prices registered a small annual increase (.01%) for single family homes, the first, in the past 38 months.
Housing crisis
Analysts explain, that buyers who rushed to meet the original November deadline to take advantage of a $8,000 tax credit for first-time home buyers caused a surge in sales earlier in the year. In fact, sales went up 28 percent in the three months to November. Congress extended the tax credit until April 30 and expanded it to more potential buyers, raising hopes that sales will pick up again during the spring buying season. “The market is going through a period of swings driven by the tax credit,” NAR economist Lawrence Yun said. “We’ll likely have another surge in the spring as home buyers take advantage of the extended and expanded tax credit.”
The cause for concern though, is the slow realization that federal programs such as these, are proverbial dangling carrots, which, besides creating very little real demand, come along with an expiry date.”Given that the tax credit appears to account for a good deal of the improvement in the housing market . . . we’re becoming increasingly concerned that the housing recovery will falter once it is removed,” said Paul Dales, economist for Capital Economics.
Others worry that, despite the federal programs, the potential customers has gone down, putting immense pressure on the housing market to find buyers. Besides, the Federal Reserve program which has kept the interest rates enticingly low till now, is set to expire. The housing market recovery is pivotal to the recovery of the US economy, and such a turn of events might just make home purchase just too expensive for too many.
On the positive side, median prices rose by 1.5% to $178,300 (the first increase since August 2007) as compared with the same period last year. But it is important to note that first-time buyers who earlier made up more than 50% of the market, were only 43% of the market. Since first-time buyers prefer low cost homes, this consequently resulted in a percentage shift of sales of the more expensive homes.
As statistics clear some haze, and create some more, the one thing evident is that the road to recovery is going to be both long and tortuous.
Bill Gates, in an interview on Good Morning America, suggested that the smoldering effects of the worst recession in decades will continue to impact the economy for the foreseeable future. “When you have a financial crisis like that, it’s years of digging out,” he said.
Overall though, the housing market in 2009 was better than the year before. About 5.1 million existing homes were sold last year, up 4.9 percent compared with 2008.
“It’s significant that home sales remain above year-ago levels,” said Lawrence Yun, the NAR chief economist. “By early summer the overall market should benefit from [a] more balanced inventory, and sales are on track to rise again in 2010.”
Fingers crossed.
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