Existing home sales continue to improve
August 21, 2009 by admin
The housing market roller coaster ride took a turn upward today with news from the NAR (National Association of Realtors) which indicated that existing home sales for the month of July were higher than expected. The existing home sales report indicated an increase in home sales over seven percent and setting the pace of annual home sales to exceed five million units, the highest level in the last two years. Today’s report from the NAR marks the fourth month with positive improvement in the existing home sales marketplace.
The real estate market has been on a roller coaster of mixed news over the last sixty days. Last month, the new home sales, existing home sales and Case Schiller metro market price report were all above expectations, great news for the real estate market. The downside is that the mortgage bankers association has recently released a report that is showing increases to home delinquencies and home foreclosures. The market appears to be stabilizing from a sales perspective, but the new inventory that is coming into the market is predominantly home foreclosures and bank repo properties. The offset of improved sales is an expectation that the new foreclosed properties could add additional pricing stress to the market, further driving down home values and eroding wealth.
The real estate market has been struggling to pull itself out of the downward spiral originally attributed to the subprime mortgage collapse. The fallout began in late 2006 as the subprime lending industry began to show signs of duress as toxic mortgages, written during periods of unprecedented home appreciation began to increase in delinquency. The problem soon spiraled recklessly out of control and forced the elimination of the subprime industry. This collapse helped to start a massive change in the secondary mortgage market as independent Wall Street firms stopped purchase mortgage backed loan securities, creating a large hole in the lending industry and adding another element of stress to a struggling economy. The collapse of this marketplace, soon impacted every area of the finance world, along the way causing the credit mayhem that sent the worlds economies on a downward spiral.
The fallout from Wall Street was having a major impact on Main Street as home values and the real estate market imploded. The government has been working on overdrive to try to support the residential market since the beginning of 2009, hoping this would help stabilize the economy. The tax rebates up to $8,000 helped to bring more buyers into the market. Combining this rebate with historically low mortgage rates (aided by further government action) and abundant housing inventory, it is apparent that the government actions have been successful in helping to bring buyers into the market, propping up existing home sales now for the last four months. The next few months will be critical for the real estate market as peak home buying season generally ends by October and the market could benefit from robust sales through the balance of the year.