House Sales Meet Sharp Decline
Today we are chatting about property sales, in particular nationwide figures. We don’t regularly care too much about nationwide figures. It is critical that you go look at your area numbers because real estate is a local industry. Nevertheless, sometimes the statistics are so incredible that they need to be brought to your focus.
According to the National Association of Realtors, pending property sales fell 30% in May from where they were in April. Granted, April was the end of the tax credit deadline. So that had certain impact on the situation. We do not quite know what has happened from May to June.
Kevin and Fred were foretelling that this would occur as much as a year ago. Essentially, we have been borrowing buyers from the future. With the incentive tax credit offered by the gov’t, loads of people resolved to purchase properties at an earlier time 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 weren’t necessarily qualified or weren’t prepared to buy a property stepped forward and purchased homes. So, in both cases, there is going to be a wait time before house sales catch up.
The biggest pieces of this enigma are supply and property prices. Because sales are depressed and inventory is going to amplify, prices will certainly slump.
With adjustable rate mortgages and their imminent resets, house owners will be taking a closer look at their mortgage and the home value. For a few the payment will go down, but so will the value of their house. There is a solid potential for an increase in strategic default. We haven’t seen the worst of defaults, unemployment and short sales. The worst is yet to appear.
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 national perspective than we ever were in 2007.
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