Despite low mortgage rates, home sales plummet
August 25, 2010
Historically low current mortgage rates aren't enough to spur more people to buy homes, now that the federal home buyer tax credit program has expired.
Existing home sales fell 27 percent in July from the previous month and were 25 percent below sales during July 2009, reported the National Association of Realtors (NAR)--depressing news for the struggling housing market.
July sales of single-family homes reached their lowest level in 15 years, and total existing home sales--including single-family homes, condominiums, town homes and co-ops--were at their lowest levels since the NAR began tracking them in 1999. The drop in existing home sales was almost twice what analysts had projected, the Wall Street Journal reported.
NAR chief economist Lawrence Yun said the slow sales pace will probably last through September and represents a "pause period" following the expiration of the home buyer tax credit.
Current mortgage rates will boost sales--if economy adds jobs
"However, given the rock-bottom mortgage interest rates and historically high housing affordability conditions, the pace of a sales recovery could pick up quickly, provided the economy consistently adds jobs," he said in a press statement.
That's a big if, though. So far the jobs recovery is moving at a glacial pace. New claims for unemployment insurance reached their highest level in nine months for the week ending August 14.
Still, total sales for the entire year will come in at a fair level because of all the activity in the first half of the year. The association projects 5 million sales for the year, slightly above the average 4.9 million annual sales of the last 20 years.
Home buyers have plenty of choices when they go shopping. Almost 4 million existing homes were available for sale at the end of July, 2.5 percent more than the previous month, the NAR reported. The inventory represents about a year's supply if sales continue at their current pace.
