Today we are chatting about house sales, particularly nationwide figures. We don’t typically care too much about national figures. It is important that you go peek at your local numbers because real estate is a local industry. Nevertheless, sometimes the figures are so incredible that they have to be brought to your attention.
According to the National Association of Realtors, pending house sales fell 30% in May from where they were in April. Granted, April was the end of the tax credit deadline. So that had some effect on the circumstances. 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. Basically, we have been borrowing buyers from the future. With the incentive tax credit presented by the gov’t, loads of people resolved to buy houses at an earlier time than they would have.
This is just like what occurred in the first half of the decade. The banks were lending cash to about anyone that wanted it. Buyers that were not necessarily qualified or weren’t prepared to purchase a home stepped forward and purchased homes. So, in both cases, there is going to be a wait time before house sales catch up.
The biggest parts of this conundrum are supply and home prices. Because sales are down and inventory is going to increase, prices will certainly fall.
With adjustable rate mortgages and their pending resets, house owners will be taking a closer look at their mortgage and the house value. For some the payment will go down, but so will the value of their property. There is a solid potential for an increase in strategic default. We haven’t seen the worst of defaults, unemployment and short sales. The nastiest is yet to arrive.
We’ve had all of this feel good news with the last couple months of sales and pulling buyers from the future. We will be in a worse position from a nationwide standpoint than we ever were in 2007.
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