Existing Home Sales Down Since November 2009

February saw the third month in a row of falling existing home sales, 23% down from November 2009. The $8,000 tax credit that was originally set to expire in November may not have been well-publicized enough to continue the positive real estate trend in the 3^rd quarter of 2009 or it is possible that the real estate market was already saturated and those who were planning on acting (either buying or selling) had already done so by early 2010.

Early predictions are that spring 2010 will see continuously weakening existing home sales, though the expanded home purchase tax credit doesn't actually expire until April 30^th. Despite an adjusted .6% decline to existing single-family homes, townhouses and condominiums, the market still seems stronger than it was at this time last year, according to economists.

February wasn't all losses for all parts of the country; existing home sales rose in the Northwest and Midwest and fell 4.7% and 1.1% in the West an South, respectively.

In addition to the overall drop in existing home sales, economists are puzzled by a 9.5% increase in housing inventory which may be largely due to banks' and other lenders' decision to put more distressed and foreclosed properties on an already saturated market. The simple solution would seem to be to stop the cycle by decreasing the foreclosures that wind up on the market at a fraction of their original value; pushing home values up and decreasing the current supply and creating demand and higher prices. In February, median home prices fell 1.8% to $165,100.

Banks may be responsible for a large portion of the renewed real estate crisis. In addition to more foreclosures flooding the market, credit is being issued to very few individuals and businesses, making it nearly impossible for individuals who want to buy real estate to do so. Fannie May still expects an increase in home sales this year, but instead of the 12% projected, the expectation is now 9%. This expectation is largely due to the assumption that first-time homebuyers have been exhausted and that the burden to purchase real estate now is on previous homebuyers who will receive a $6500 tax credit.

Hope among economists and government officials is that people will rush to snag property before the April 30^th deadline, but the 3^rd and 4^th quarters may be even more bleak. Paul Dales, an analyst at Capital Economics says it best: "I think what we have seen really is that the recovery we saw at the last year was largely due to the tax credit. We're likely to have another burst, but my concern is that once that goes through, we will see another [decline] and the housing market will look quite weak."

"Existing-home sales fall for third straight month". Renae Merle. http://www.washingtonpost.com/wp-dyn/content/article/2010/03/23/AR2010032301226.html.

"Fannie Mae". http://projects.washingtonpost.com/post200/2007/FNM/