Home Sales Meet Sudden Decline
July 7th, 2010
Today we are talking about house sales, particularly national statistics. We do not typically care too much about national figures. It is crucial that you go glance at your local numbers because real estate is a local industry. Nevertheless, sometimes the statistics are so incredible that they need to be brought to your attention.
According to the National Association of Realtors, pending house sales fell 30% in May from where they were in April. Granted, April was the finish of the tax credit deadline. So that had some impact on the situation. We do not quite know what has happened from May to June.
Kevin and Fred were foretelling that this would happen as much as a year ago. Essentially, we have been borrowing buyers from the future. With the incentive tax credit offered by the government, loads of people resolved to purchase houses earlier than they would have.
This is just like what occurred in the first half of the decade. The banks were lending money to about anyone that sought it. Buyers that were not necessarily qualified or were not prepared to acquire a house stepped forward and purchased houses. So, in both cases, there is going to be a lag time before house sales catch up.
The largest parts of this enigma are inventory and house prices. Because sales are down and inventory is going to increase, prices will definitely plunge.
With adjustable rate mortgages and their pending resets, house owners will be taking a closer look at their mortgage and the house value. For some the payment will go down, but so will the value of their house. There is a solid potential for an increase in strategic default. We haven’t seen the worst of defaults, unemployment and short sales. The worst is yet to appear.
We’ve had all of this feel good information with the last few months of sales and pulling buyers from the future. We will be in a worse position from a national viewpoint than we ever were in 2007.
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Fred Weaver is a founding co-owner of Group 46:10. He has been working in the financing/real estate business for over 7 years. Fred began his real estate career by working for a large wholesale bank as a processor and rate/lock specialist for home mortgages. After 2 years in the business, Fred transferred from the banking side of home loans to the mortgage side. While on the mortgage side of financing, Fred gained experience originating mortgages and processing files for Morgan Capital of Arizona, Inc.
Kevin is a founding co-owner of Group 46:10. He began working in the real estate business in 2007 after spending 8 years working in the finance industry for companies such as Bank One, Green Tree Financial, & GE Capital.