Home Sales Outlook

Applications for home loans dipped last week even though mortgage rates remained at their lowest level in decades. That doesn’t bode well for home sales --- if no one is applying for a mortgage, few will be buying homes. Applications taken out to purchase homes fell in early July and were 43% lower than at the same time in 2009 according to the Mortgage Bankers Association. This level of applications for mortgages to purchase homes is the lowest its been since December 1996.

This coming week will be a big week for housing news.  Look for headlines about home builder confidence on Monday (not optimistic), housing starts on Tuesday (down – see Monday’s news) and existing home sales for June and prices for May on Thursday (both likely to be down).

June home sales will still be propped up by the homebuyer’s tax credit. To obtain the tax credit, buyers had to be in contract to buy a home by April 30 and close by June 30. The existing home sales numbers reported by the National Association of Realtors^® are for actual closings, so June will show the continuing impact of the tax credit incentive. The original deadline to close by June 30 has been extended because it’s taking longer to close loans in these days of short-sales and tight credit scrutiny. So, now we’ll see the lingering impact of the tax credit on home sales statistics through the end of September; however, I think the bulk of sales did close before June 30.

Some economists expect a "fierce correction" in home sales in the coming months – taking sales volumes down to the lows of 2007 and 2008. If true, this inevitably will bring further price reductions. Other economists are more optimistic -- or perhaps the right words are "less pessimistic". Looking at the reality of foreclosures to come, home prices are unlikely to improve before the end of 2012 in any part of the country. Still, 90% of homeowners are glad they bought their homes – proving that a home is more than a dollar sign.

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