Federal tax credit Expiration Causes Plunge in Home Sales
The expiration of the federal tax credit for first home buyers existing time and has been detrimental to home sales in many markets across the United States.
The decline in sales was much more substantial than economists predicted. Many markets were hit with a reduction of up to 25% to 30% on home sales, often twice its expected decline.
While new home sales in April rose 45% in recent years put the house in the annual rate of 504,000 sales. The weak sales figures for May left many home builders with large inventories of new homes. These builders can reduce the prices of most of this inventory that could force down house prices in many markets around the country.
Home sales are not likely to start seeing a significant increase until at least August or September, June and July expected to show weak sales figures.
Although mortgage rates are low – 4.72% 30 year fixed rate mortgage to 4.17% 15 year fixed rate mortgage from 10/06/2010 – mortgage applications fell 40% in late May, compared with the previous month. According to mortgage banks, these figures have fallen to their lowest level in 13 years. Much of this is attributed to tighter lending standards. Although interest rates are at historic lows, potential buyers are struggling to qualify for a mortgage loan.
Another side effect from weak home sales in May is a large inventory of new homes on the market. According to Zip Realty Inc., of Emeryville, California, home listings have increased 1.7% in 26 major metropolitan areas across the country. This increase is from April to May 2010. This increase in new housing in the market is not a common event for the month of May in previous years.
Although there were sharp declines in home sales in most markets around the country for May, markets that are usually priced in the homes of millions do not see a dramatic change. Due mainly to a tax credit of up to $ 8,000 is a relatively incentive small to buy a house in the price of millions of people.
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