Home Sales Both Up and Down

It has been an interesting week on the national home sales front, as home sales have been reported as both up and down. First, sales of existing homes in November surged to a three year high. Then, sales of newly built single family homes fell 11%, to the lowest level in six months. Both results were blamed on the federal subsidies for starter homes. What gives?

According to a report in the Contra Costa Times,

Sales of previously occupied homes surged in November to the highest level in nearly three years, spurred by federal subsidies for starter homes and a massive Federal Reserve push to drive down mortgage rates.

The strong figures were driven by a race to take advantage of a tax credit of up to $8,000 for first-time homebuyers. The credit has since been extended to next spring, but the government initially planned to end it Nov. 30.

“It was like the end of the world,” said real estate agent Stephanie Somers of Re/Max Access in Philadelphia. “All the first-time buyers converged onto that one month.”

The pace of home sales is now up 46 percent from its bottom in January and still 10 percent shy of its peak from four years ago, according to data released Tuesday by the National Association of Realtors.

Soon after came the report about new home sales.

According to Yahoo News, a report from the Commerce Departments “showed sales of newly built single-family homes unexpectedly dropped 11.3 percent last month to a 355,000 unit annual rate. Financial markets had expected new home sales to increase to 440,000 units.

Analysts blamed the drop on the expectation that a popular tax credit for first-time home buyers would expire at the end of November.

New home sales are counted after a contract is signed, but closing on a contract usually takes 30 to 60 days more. The credit has since been extended and expanded and analysts expect sales to resume their upward trend in coming months.

“We are going to see a steady increase in new homes sales through next year. The reports today are supportive of a moderate economic recovery through 2010, not a V-shaped recovery, not a double-dip,” said Robert Dye, a senior economist at PNC Financial Services in Pittsburgh.

It is certainly an interesting time in real estate. We are seeing much the same in Pleasanton, Dublin, San Ramon and the rest of the Tri-Valley, as most neighborhoods have seen a significant increase in sales recently over what was happening earlier in the year. The lagging economy has also dampened the building of new homes in the area. With the extended and expanded tax credits for first time home buyers, I would expect sales to continue to be strong as we head into 2010. One possibility that could dampen sales is the low inventory levels we have in many neighborhoods. I would expect more homes to come on the market as we move past the holidays and head into spring.