So much for the housing rescue bill’s $7,500 temporary tax credit spurring a flurry of home sales. According to data released today by the National Association of Realtors (NAR), the level of existing-home sales slid 2.2 percent in August, to a seasonally adjusted pace of 4.91 million homes. This stands 10.7 percent below the level of existing-home sales in August 2007, despite approval of the housing legislation in early August.
NAR leadership blamed the drop on the ever-tightening availability of home loans. “The difficulty in obtaining a mortgage increased over past couple months, making it more challenging for creditworthy borrowers to find financing,” said Richard Gaylord, NAR’s president and a real estate broker in Long Beach, Calif. “Our hope is that overly tight lending criteria can be loosened with reasonable standards and credit so that sales activity can catch up with demand.”
Of course, demand for homes appears to be extremely low these days, given the financial turmoil on Wall Street and Main Street. Companies aresheddingjobs. Lending to businesses and consumers alike is becoming increasingly restrictive, if money is available at all. Meanwhile, home values are continuing to sink, with the median existing-home price falling 9.5 percent year-over-year to $203,100 in August, according to NAR’s own data. Builders aren’t starting many homes these days either, with new housing starts falling to a 17-year low last month.
With so many factors at work, Patrick Newport, U.S economist with Global Insight in Lexington, Mass., suggested today that existing-home sales will will not improve anytime soon, despite improved affordability due to sliding mortgage rates and lower home prices. "We think that sales will drift down in the coming months as the economy slips into recession, and as lending contracts because of bank consolidation," he said.
However, Newport did note "one encouraging detail" in today's numbers. "The months' supply of existing single-family homes fell four notches to 10.0 months, the second straight monthly decline," he said. "The decline merits a small round of applause, however, since, normally, the inventory yardstick is about five months."
Alison Rice is senior editor, online, at BUILDER magazine.
Learn more about markets featured in this article: Los Angeles, CA.