subject: Sales have Dropped in a Market Dominated by Foreclosures [print this page] Sales have Dropped in a Market Dominated by Foreclosures
Sales have dropped in a market dominated by foreclosures. In May the figures showed that sale of existing houses had dropped. This has caused delay in processing mortgage applications and questions raised about the flood insurance programmes of the federal government, noted the National Association of Realtors.
In May there were sales of 5.66 million existing residential houses less than the April number of 5.79 million. Although the figures were less in May as compared to April it was a 19% increase from May 2009.
Lawrence Yun of the association said that the increase (year-over-year) was caused by the tax credit offered by the federal government that could be availed of only by the purchasers of residential homes who would close deals by 30th June. Thus it is not likely that the previous performance could be sustained.
Yun said, "We are witnessing the ongoing effects of the home buyer tax credit, which we will also see in June real estate closings. However, approximately 180,000 home buyers who signed a contract in good faith to receive the tax credit may not be able to finalize by the end of June due to delays in the mortgage process, particularly for short sales."
At the close of March the Congress retired for recess without seeing to the renewal of flood insurance programme. Thus this has come to be suspended from 28th March. In April Obama had given his signature to extend it up to 31st May. Technically the purchasers can still avail of a mortgage if they have proof that they had submitted application for flood insurance; but in reality it was neither easy nor viable.
Yun explained that the ambiguity hanging over the programme has somewhat told on the sale figures of May. For over 35% of the residential houses in Louisiana and Florida the lenders had ruled that they would have to have flood insurance. The proportion is the highest in the country according to the figures released by the association.
Yun noted that surveying of the possible impact of the oil spill in Mexican Gulf on sale of residential houses on these two states was also being monitored by his association.
The expiry of the tax credit has greatly weakened the housing sector. This trend is expected to continue for the next few months said Dan Greenhuas of Miller Tabak & Company. In the long run the sale of residential houses will give a comprehensive picture of the spending mood of consumers.
