CNBC report 9/2: "Pending sales of previously owned U.S. homes rose unexpectedly in July ... suggesting a tax credit-related housing market decline was close to bottoming."
The new housing numbers have definitely been a major news story over the last 48 hours. The Dow dropped over 100 points on the announcement of July’s existing sales numbers. The cries of a double-dip sound like the screams of Chicken Little: ‘The sky is falling! The sky is falling!’ Pundits are claiming real estate will never be looked at the same again. We asked Steve Harney to comment on what the report actual means to the housing recovery. As always, he was more than willing to share his insights. – The KCM Crew
I want to start by saying that Armageddon is not upon us. Was NAR’s Existing Home Sales Report tough to read? Yes. Were there any surprises in the report? Just one: the fact that prices have remained stable. And that was good news.
All the panic and gut-wrenching revolves around two numbers:
- The lack of sales in July
- The months’ supply of inventory now available
Neither number was a surprise to anyone truly following the real estate market. Right here in this blog, the KCM Crew has been claiming for the last nine months that sales in 2010 will be approximately what they were in 2009. The tax credit moved many purchases forward as buyers wanted to be in contract before the April 30 deadline. That push forward of demand created a false sense of hope that a major market comeback was taking place in the spring. It also created this current vacuum of demand during the summer.
Just as we should have realized that the great market of the spring could not be sustained, we must now realize that plummeting sales numbers will not continue. It may take one or two months for the impact of the tax credit to fully dissipate. After that, we will see a more normal buyer demand throughout the fall and winter. We must not forget that people decide to move every day. Prices are great, interest rates are at historic lows and the assortment of properties for sale is fabulous. Buyers will buy!!
In regard to the months’ supply of homes for sale, we must remember one basic principle: prices will come down if demand is constant and inventory increases. Houses will sell over the next twelve months, approximately 5 million of them. There may be more than double that amount trying to sell however. Which ones will sell? Those that are priced correctly for the current market. Your price must be compelling in order to make your home attractive to today's buyers who have a tremendous selection of homes from which to choose.
As the year moves forward, it is my belief that months’ inventory will remain in double digit numbers. That means that prices will continue to soften.
What does this mean to you?
You definitely will be able to sell your home and move on with your life. If that’s the goal, you will do better financially if you do it sooner rather than later.