VOL. 125 | NO. 122 | Thursday, June 24, 2010
US Home Sales Tumble as Tax Credit Expires
By Eric Smith
Sales of new homes plummeted in May, falling 31 percent locally and 33 percent nationally as potential homebuyers scurried from the market once the homebuyers tax credit expired.
The nosedive created concerns that the housing market will endure a “double dip,” with sales numbers showing significant declines for the second time since the recession first hit.
And the announcement sent shockwaves along Wall Street, where the Dow Jones industrial average fell about 25 points in morning trading.
The 33 percent national dropoff took new home sales to the lowest level on record, according to an Associated Press report.
The Commerce Department said new home sales fell in May from a month earlier to a seasonally adjusted annual sales pace of 300,000, the slowest sales pace on records dating back to 1963.
The reports indicate shoppers stopped pulling the trigger on buying homes once they could no longer receive federal tax credits of up to $8,000. That program required a home contract by April 30 and closing by June 30.
“We fear that the appetite to buy a home has disappeared alongside the tax credit,” Paul Dales, U.S. economist with Capital Economics, wrote in a note to the AP. “After all, unemployment remains high, job security is low and credit conditions are tight.”
Economists surveyed by Thomson Reuters had expected a May sales pace of 410,000. April’s sales pace was revised downward to 446,000. The difference between expectation and reality was startling.
“We all knew there would be a housing hangover from the expiration of the tax credit,” Mike Larson, real estate and interest rate analyst at Weiss Research, wrote the AP. “But this decline takes your breath away.”
Locally, the picture was equally grim.
Shelby County saw just 69 new home sales last month, down nearly a third from 100 new home sales in April and also down 25 percent from 92 new home sales in May 2009, according to real estate information company Chandler Reports, www.chandlerreports.com.
However, the total wasn’t as historically bad as the national records indicate, with February notching just 60 new home sales.
New home sales in Shelby County averaged $228,381 in May, a slight increase from $226,365 in April but a 6 percent decline from $241,805 in May 2009.
And May’s total dollar volume was $15.8 million, down 30 percent from $22.6 million in April and down 29 percent from $22.2 million in May 2009.
Glenn Moore, president of the Memphis Area Association of Realtors and owner of Glenn Moore Realty, said the numbers don’t tell the whole local picture, especially with foreclosures continuing to play a big role in the market.
But the numbers are nonetheless alarming.
“I can’t say that the tax credit going away hasn’t affected (sales). I’m sure it has had an effect, but I think it’s a combination of things,” Moore said. “We are still absorbing the foreclosures and we will see figures like this probably as long as those (foreclosures) are there. I think we’ll see light at the end of the tunnel once these foreclosures are absorbed. And that will happen.”
The Associated Press contributed to this report.
Chandler Reports is a division of The Daily News Publishing Co. Inc.