The national news, as well as area papers, are full of stories about the abrupt dropoff in housing sales for May. Everyone knew that this might happen when the tax credits expired, but the amount of the decline is still surprising to people. After all, many families did not qualify for the credits, which decreased as income increased. Also, although the second round of credits applied to repeat buyers, it was always aimed at first-time buyers. They bought, but probably mostly in the first round, from what we could see. Ordinarily, first-time buyers make up about 45% of the total market for sales. With the tax credit, that percentage had increased to 55%. Even though that means that we have moved 10% of the sales from the future into the present (now the past) with the help of tax credits, there is still almost half of the buying population unaccounted for in these numbers.
Where did they go? It seems that consumer confidence, once again, has reared its ugly head. All the news reports about job losses, retail sales, and the stock market have affected homebuyers negatively. While we knew that this could happen--it's some version of the double-dip theory--it still surprises those of us in real estate, to some extent.
Interest rates are very low. Housing prices are back down, in many cases, to where they were several years ago. Everyone knows that, even if you sell low, it doesn't matter, as long as you also buy low. Consumers have stayed out of the fray for most of the tumultuous recent past. So they should be out in force, and they're not.
One theory is that there's too much on the market, and therefore they have paralysis. Another is that they think prices will continue to decline. It is true that mortgages are harder to get. And, of course, it's summer--hot and humid weather tends to keep people from doing all but the essential tasks of life.
However, we're all watching with bated breath. The housing industry cannot afford a long layoff from sales, as we endured at the beginning of last year. Congress, take note!
