Today we are talking about house sales, in particular national figures. We don’t usually care too much about national figures. It is crucial that you go glance at your area statistics because real estate is a local business. Nevertheless, sometimes the statistics are so unbelievable that they have to be brought to your awareness.
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 a little influence on the situation. We do not quite know what has happened from May to June.
Kevin and Fred were foretelling that this would happen as much as a year ago. In essence, we have been borrowing buyers from the future. With the incentive tax credit offered by the government, tons of people resolved to buy houses earlier than they would have.
This is just like what occurred in the first half of the decade. The lenders were lending money to about anyone that wanted it. Buyers that were not necessarily qualified or weren’t prepared to purchase a home stepped forward and bought properties. So, in both cases, there is going to be a gap time before home sales catch up.
The biggest pieces of this enigma are inventory and house prices. Because sales are downcast and inventory is going to increase, prices will absolutely fall.
With adjustable rate mortgages and their pending resets, home owners will be taking a closer look at their mortgage and the home value. For some the payment will go down, but so will the worth of their property. There is a clear potential for an increase in strategic default. We haven’t seen the worst of defaults, unemployment and short sales. The nastiest is yet to appear.
We’ve had all of this feel good information with the last couple months of sales and pulling buyers from the future. We will be in a poorer position from a national point of view than we ever were in 2007.
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