Despite tax credits and cheap mortgage rates, 2010 shaping up to
be tough year for housing
This year's home sales are shaping up to be as dismal as last year,
despite cheap home prices and mortgage rates that have fallen to
the lowest levels in decades.
Sales of previously occupied homes rose last month, but not enough
to keep this summer from being the slowest for home sales in more
than a decade. And the year is not expected to finish much
About 3.4 million previously occupied homes have been sold in the
U.S. through August. Most experts expect roughly 5 million to be
sold through the entire year. That would be in line with last
year's totals and just above sales for 2008, the worst since
A few even think sales will fizzle so much this fall that the year
will finish worse than 2008, when the country was in the deepest
recession since the Great Depression.
"We don't have great expectations for housing for the remainder of
the year," said Michael Feroli, an economist at JPMorgan Chase, who
expects around 5 million homes will be sold this year. "If you're
not confident (in the economy), you're not going to be buying a
High unemployment and a record number of foreclosures have kept the
economy from gaining strength since the recession ended. Those
factors have also deterred people from buying homes, with many
worried that home prices have yet to reach their bottom.
The median sale price last month was $178,600, up only 0.8 percent
from a year ago. Potential buyers are nervous, said Eric Matz, a
real estate agent with Coldwell Banker in the San Diego area.
"Nobody wants to see their investment go down after they buy it,"
he said. "It's as tough as I've ever seen it."
Sales of previously occupied homes did increase 7.6 percent in
August from July to a seasonally adjusted annual rate of 4.13
million, the National Association of Realtors said Thursday. But
July's sales were the worst in a 15 years, making August the second
worst since 1997.
The cheapest mortgage rates in decades haven't helped. The average
rate on a 30-year fixed mortgage was unchanged at 4.37 percent,
mortgage buyer Freddie Mac said. Earlier this month, the rate
dipped to 4.32 percent, which was the lowest level on records
dating back to 1971.
And unlike last year, this fall there are no government incentives
to encourage home-buying. Those were offered throughout most of
2009 before ending in April of this year.
The real estate industry pushed hard for those incentives, making
the case that they would help the housing market recover. The Obama
administration spent $25 billion on the tax credits. But many
economists say the government simply encouraged buyers to make
their purchases earlier in the year.
Moody's Analytics projects 5.17 million homes are likely to be sold
this year. That's about level with 5.16 million last year and
slightly above 2008's 4.9 million.
Americans bought more than 6 million homes a year from 2003 to
2006, when the housing market was booming.
Patrick Newport, an economist with forecasting firm IHS Global
Insight, doesn't see the housing market returning to those levels
And Newport thinks 2010 will end up as the worst year since 1997,
projecting just 4.79 million homes will be sold. The weak job
market is dampening sales, he says.
"When they start hiring, people will move more, which means more
homes will sell," he said.
Foreclosures have hurt the market by pulling down prices. About 2.5
million homes have been lost to foreclosure since the recession
started in December 2007, according to RealtyTrac Inc. And another
3.3 million homes could be lost to foreclosure or distressed sale
over the next four years, according to Moody's Analytics.
That means buyers have tons of properties to choose from and don't
need to hurry. Even those who want to buy are trying to weed
through dozens of properties that are often in bad shape. And
buyers often face delays even when they do make an offer.
Valkyrie Barnett, 27, of Seattle, and her husband have been on the
home hunt for five months. They've seen as many as six houses a
week, but most have been foreclosures with severe damage.
They put in an offer on one property in June, but haven't gotten a
reply. The home is a so-called short sale -- one in which the bank
agrees to let a home sell for less than what the borrower owes on
the mortgage. Those sales often take months to complete.
While she'd prefer to buy a home soon, Barnett says time is on her
side. "I don't feel super rushed," she said.
Written by: AP Real Estate Writer Alex Veiga