Weekly Market Insights

Monthly Home Sales

Monday, March 01, 2010

Sales of both new and existing homes have slipped in recent months, raising doubts about the durability of the housing market recovery. January new home sales fell to a seasonally adjusted annual rate of 309,000, the lowest level on record (since 1963), while existing home sales of 5.05 million retreated to mid-2009 levels. Extreme weather played a role as did the tax credit for first-time buyers, which was scheduled to end in November until Congress extended and expanded it to include repeat buyers. Sales are likely to bump up in the spring as a follow-on wave of buyers seeks to take advantage of the extended tax credit before it ends in April. Besides the impending expiration of the tax credit, the housing market is facing other headwinds. Approximately 7.7 million homeowners are behind on mortgage payments, and over 4 million are now delinquent and going through foreclosure. This will be a destabilizing force on housing prices and add to the shadow supply of rental units. Moreover, the Federal Reserve is scheduled to complete its purchase of $1.25 trillion in mortgage-backed securities by the end of March, a program that has kept mortgage rates low. On the positive side, the return of employment growth this year will support housing demand. Look for the market to firm up gradually but fitfully over the next few years.

National Association of Realtors, Grubb & Ellis 

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