Home Sales Rise As Prices Continue To Fall
More housing numbers for the month of May have been released, with mixed results. The good news? Houses are finally starting to sell again, after months of stagnant sales numbers and growing inventory. The bad news? Part of the reason that houses are selling is because prices are continuing to fall. Home sales increased by 2.4% in May compared to April, but prices were down nearly 17% nationally compared to a year ago.
Part of the reason that the average median sale price was so much lower is that a third of the homes sold were either foreclosures or distressed properties. As more homeowners struggle to hang on to their homes, the selling of more distressed property will likely keep median home prices low for a while. People that are desperate to get their homes sold will be willing to accept less than what might be the market value in more normal conditions.
The increase in home sales can be at least partially explained by the low available interest rates and the $8000 tax credit available to first-time homebuyers, or people who have not owned a home for the past three years and intend to use the purchased home as their primary residence. This tax credit is available through the end of November unless it gets extended, and it should help to keep potential buyers in the market.
Even though many of the sales being made are not necessarily ideal transactions between buyer and seller, the increase in home buying is a good sign for the housing market and the overall economy. Prices are likely to stay low, but once buyers feel like the low prices are sustainable and unlikely to dip further, they will start to take advantage of the deals that are so easy to find in so many markets. Potential buyers are out there, and they won’t sit on the sidelines forever, but they need to see stability in prices before the real wave of buying will begin.
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