Home Sales are Up in September: Is the Housing Market in Recovery?
New and existing home sales really showed an increase during September 2010. The reason for the increase was a second month of decreasing mortgage rates. Some economists believe that the housing market is in a slow state of recovery. Sales of previously owned homes rose in September to 4.53 million units, which was a 10 % increase from the August 2010.
Economists previously forecasted that the housing market would only rise to 4.25 million units in September, but there were a substantial number of homes sold due to lower mortgage rates, an upswing in the economy and a decreased inventory of houses. This trend will probably continue into October 2010 and beyond. However, according to some economists, though, one problem that could hinder the further increase in home sales is the robo-signing scandal.
Although the robo-signing scandal really made a negative impact on the economy, the report for September offered a glimmer of hope to the housing and economical markets. Unfortunately, home sales were still substantially lower than April 2010. During that time, home sales were 22% below April 2010’s numbers and 19% lower from the year earlier. This 22% drop in house sales was due, in large part, to the now-defunct $8,000 new home buyer tax credit that was offered by the government. The reason for the August and September 2010 rise in home sales was because the housing market was finally beginning to show signs of stabilizing.
New home inventory showed a decrease of 1.9% in September 2010; there was approximately a decrease in 4.04 million units. During 2010, the construction industry fought a losing battle with the number of distressed and foreclosed homes on the market. From this information, economists predicted that the dip in inventory was because less new homes were being built. When demand increases for new homes, construction will ramp up again.
According to the Commerce Department, new home sales were up 6.6% to an annual sales pace of 307,000. This increase was nothing compared to the fact that new home sales showed some of the worst sales numbers since 1963. New home sales had risen 9% from sales’ all-time low in May 2010. Even though this was the case, new home sales were still 78% below the number of homes sold since July of 2005; a decrease of approximately 1.4 million units. The rise in sales figures was spurred on by the fact that the surge in new home sale were down by about 3% in the Northeast and the South, up by about 61% in the Midwest and down by 10% in the West.
A US economist with Capital Economics, Paul Dales, predicted that, even though increased sales were encouraging, a comprehensive rebound was be unlikely to happen for a few years; possibly not until this current year. Furthermore, quite a few economists, including Chief Executive of Mortgage Master, Inc.’s Leif Thomson, were concerned that, with the uncertain economy and unemployment rates, which seemed to not be stabilizing, consumers would not be ready to jump into home ownership; hence, the instability of the housing market.
The US economy relies heavily on the housing market and, even though there seems to be a light at the end of the tunnel, be prepared for further swings in the market before it stabilizes completely.
