What Tanking Home Sales Mean for Economic Recovery
After a big drop in December, sales of existing homes fell again in January -- a development that renewed concerns about the outlook for a real estate recovery.
Although December's monthly sales plunge was deeper than January's, it was easier for housing market experts to explain. Uncle Sam's
Altogether, home sales have dropped 22 percent from November's credit-induced peak.
"The most likely reason for this is that the home buyer tax credit, initially set to have expired at the end of November, pulled transactions forward from December, January, and perhaps more months," economists at
"The pain of this hangover seems to be a little bit more than what I was expecting," says
A handful of forces are working to bring buyers back into the market.
First, home prices continue to decline. The national median price of an existing home fell 3.4 percent to
Buyers who close a home purchase by
Still, Larson expects lower prices to bring buyers into the market and increase sales as we move into the spring home-buying season. "If you are selling, it's not good news, if you are upside down on your home, [it's not good news], but if you are trying to just buy a home and put a roof over your head and you want to pay a reasonable price, you are looking at the cheapest homes in almost eight years here," Larson says. "That makes a compelling argument for stabilization."
While Newport argues that the tax credit will indeed juice home sales at bit, he doesn't expect a sustainable recovery to take hold until late this year. "Our forecast has sales dropping in the first quarter of 2010, payback from the first tax credit. Sales will take a second hit in the third quarter of 2010, payback from the second tax credit," Newport said in a report. "Later in the year, as the job market improves, we expect sales to start improving on a sustainable basis."
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What Tanking Home Sales Mean for Economic Recovery | Luke Mullins
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