By Mark Huffman
ConsumerAffairs.com
December 22, 2009
Can homeowners finally begin to see some sustained increase in their equity in 2010? Though some forecasts have been slightly bullish, the most recent new and existing home sales reports present a mixed picture.
First, the good news.
On Tuesday the National Association of Realtors reported sales of existing homes surged 7.4 percent in November from the month before. The annual rate of 6.09 million units was up a whopping 44.1 percent from November 2008.
But keep in mind that buyers were under the impression the first time homebuyers' tax credit was set to expire at the end of the month. Many rushed to beat the deadline, pumping up November's sales.
"This clearly is a rush of first-time buyers not wanting to miss out on the tax credit, but there are many more potential buyers who can enter the market in the months ahead," said NAR chief economist Lawrence Yun. "We expect a temporary sales drop while buying activity ramps up for another surge in the spring when buyers take advantage of the expanded tax credit, which hopefully will take us into a self-sustaining market in the second half of 2010. In all, 4.4 million households are expected to claim the tax credit before it expires and balance should be restored to the housing sector with inventories continuing to decline."
But while first time buyers scrambled to buy existing homes last month, they ignored new homes. On Wednesday the U.S. Commerce Department reported sales of new homes fell by 11.3 percent. It was the lowest sales rate in the new home sector since April.
The median sales price of a new home sold in November was $217,400, down 1.9 percent in the past year.
Despite the big drop in sales, builders continued to reduce their inventories of unsold homes, a sign that bodes well for containing the drop in prices. The number of unsold homes fell 2.1% to 235,000, which is the lowest in 38 years. Building have stopped building homes in a bid to cut their inventories and the competition with foreclosed and distressed property.
So what can homeowners expect in 2010? Like politics, all real estate is local and some markets will perform better than others. But the homebuyers' tax credit, which appears to have boosted sales in the second half of 2009, has been expanded and extended through the first half of 2010. And this week's sales figures might be a bit more optimistic than the conflicting numbers would appear.
Government economists appear less confident of the new home sales figures than those of existing home sales. In fact, it's theoretically possible new home sales did not decline at all in November, since the Commerce Department says the standard error in the November sales report was plus or minus 11 percent.
