With the homebuyer credit drawing to a close, pending home sales and sales of existing properties suffered record declines in May. States like California and Texas have launched their own housing stimulus measures, but the threat of a double-digit price drop in the year ahead still remains. See the following article from Property Wire for more on this.
Sales of previously owned properties in the US plunged a record 30% in May, far higher than expected, new figures show.
A tax break, designed to boost sales, was withdrawn at the end of April, and a fall in deals was expected, but at around 12%, more than half the level actually recorded.
The break had galvanized the market, but these figures show it has floundered without it. A similar decline is expected in June.
But on Wednesday, the US Senate approved a measure to extend the deadline for first time homebuyers to close on a home, while still taking advantage of the federal tax credit. President Barack Obama has yet to sign the bill, which would push the deadline back to September.
The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in May, fell to a record low 77.6 from 110.9 in April.
‘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. Existing home sales that close in June will remain elevated, but we’ll then see a notable decline for July and August,’ said NAR chief economist Lawrence Yun.
The index is 15.9% lower than May 2009 and fell sharply in all regions of the country.
Contracts fell 33.3% in the South, the country’s largest region, and dropped 20.9% in the West. Contracts dropped 31.6% in the Northeast and fell 32.1% in the Midwest.
Some states have started offering tax credit incentives of their own to try to keep their home sale numbers up. In March California approved its own version of a homebuyer tax credit. While in Texas, the Department of Housing and Community Affairs unveiled a $500 million program in May to help low to moderate income homebuyers.
There has also been a drop in new home construction, suggesting developers are not particularly confident at present. The housing recovery still faces many headwinds, namely unemployment and an oversupply of housing. Unemployment is running close to 10 percent, and home foreclosures are at all-time highs, and neither of these trends look to be turning around in the near future.
Many analysts are predicting there will be continued downward pressure on home values for the remainder of the year. Depending upon who you believe, home prices are predicted to fall somewhere between 5 and 10% in the coming year.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.