Without Tax Credit, US Home Demand Keeps Slumping

For the fifth week in a row home loan applications have declined in the US, showing signs of the effect the federal tax credit had on the housing market. According to this story from Reuters.com loan applications dropped to the lowest levels since 1997.

Demand for loans to purchase houses fell 5.7 percent in the week ended June 4 to the lowest level since February 1997, even after adjusting to account for the Memorial Day holiday.

Home buyers have been on hiatus since many rushed to sign purchase contracts ahead of the April 30 deadline for up to $8,000 in federal tax credits.

"It's very worrying," said Paul Dales, U.S. economist at Capital Economics in Toronto, said of the degree of payback from more than a year of federal buyer tax incentives.

"We have to face the unfortunate fact that the housing market really isn't out of the woods yet," he added. "At a time when the economic recovery is still looking fairly fragile it won't be a good thing if people are moving less and spending less on buying new durable goods like fridges and sofas."

Existing U.S. Home Sales Climb to 5.35 Million Rate

From Bloomberg.com:

Sales of previously owned homes in the U.S. rose in March for the first time in four months as buyers took advantage of a government tax credit and the weather improved.

Purchases climbed 6.8 percent to a 5.35 million annual rate, more than anticipated, from a 5.01 million pace in February, figures from the National Association of Realtors showed today in Washington. The median prices climbed 0.4 percent from March 2009.

The thawing out from February’s blizzards probably helped the market last month, while the Obama administration’s credit worth up to $8,000 may keep underpinning demand through June, when it’s next due to lapse. The outlook for the second half of the year depends on the speed and magnitude of the recovery in the job market, indicating the housing rebound may be slow to develop.

“You have some fundamental improvement in housing,” said Stuart Hoffman, chief economist at PNC Financial Services Group. Inc. in Pittsburgh. “Housing is coming back. It’s still got a long way to go.”

Existing home sales were forecast to rise to a 5.29 million annual rate, according to the median estimate of 76, economists in a Bloomberg News survey, from a previously reported 5.02 million rate in February. Projections ranged from 5.05 million to 5.5 million.

U.S. Home Sales Rise to Two-Year High on Tax Credit

After struggling for the better part of the last two years, it looks like the real estate industry is finally rebounding as the third quarter of this year represented the largest increase of home sales in two years. Much of this increase can likely be attributed to the homebuyer’s credit, which was due to expire at the end of this month. However, other financial experts are asserting that many of the buyers who used the credit would have purchased a home anyways. Checkout the following story from Bloomberg.com on the new report.

U.S. home sales increased 11 percent to a two-year high in the third quarter as an $8,000 tax credit for first-time buyers boosted demand.

Sales of existing single-family homes and condominiums increased to 5.3 million at an annualized, seasonally adjusted rate from the previous quarter, the National Association of Realtors said today. The median price fell 11 percent from a year earlier to $177,900, the Chicago-based trade group said.

Distressed sales accounted for 30 percent of all transactions, down from 36 percent in the second quarter, the Realtors said. President Barack Obama signed legislation on Nov. 6 extending the housing credit that was set to expire at the end of this month. Demand from buyers seeking to use the benefit reduced the inventory of previously owned homes for sale to 3.63 million in September, the lowest since January, the group’s data show.

“What the tax credit did was make the housing market stronger by borrowing from future sales,” said Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts. “There’s payback after it expires in 2010 -- we’ll see weaker demand.”

The sales gain to 5.3 million was the highest since the third quarter of 2007, when sales were 5.45 million.