Home sales unexpectedly decline despite tax credit

Total existing home sales were weaker than forecasts, falling 2.2% to 5.66 million units in May from 5.79 million units in April. Single-family existing home sales declined 1.6% in May, while condo sales fell 6.8%.

BOTTOM LINE:

We had speculated that existing home sales in May might have been held back by processing delays resulting from the surge in contract signings (pending home sales have risen almost 23% over the last three months) combined with a tougher mortgage approvals process, but NAR commentary suggests that this was more of an issue than we anticipated. It will likely be some time before home sales settle back to a more sustainable level—even longer if the effort in the Senate to extend the homebuyer tax credit deadline for contract closings to September 30th for contracts signed before April 30th is successful—especially since once the tax credit effect passes, home sales should fall below their sustainable level for a while because of the borrowing-forward of sales due to the tax credit. Given the expiration of the tax credit for contract signings in April, we expect that tomorrow’s new home sales report for May will feature a substantial decline in sales.

Source RDQ

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