The experts are baffled.
Even with the incentives through the ending of the home rebate program, home sales dropped from April’s levels. Sales did increase 19 percent from May of 2009.
What has analysts and the industry nervous is that if the contracts signed in anticipation of getting the home owners rebate do not close at the rate expected, it could send shockwaves through the industry.
So many homes are sold now on a contingency basis. This means the home I want to buy can not close until I sell my home. If contracts start to fail, it could have a cascading effect throughout the industry and homes will be returned to the market, without the benefit of the homebuyers tax credit.
The National Association of Realtors said sales fell 2.2 percent month over month to an annual rate of 5.66 million units from an upwardly revised 5.79 million-unit pace in April.
Analysts polled by Reuters expected May sales to rise 5.5 percent to a 6.12 million-unit pace from the previously reported 5.77 million units in April.
Sales were expected to rise as transactions for existing homes are measured at contract closing. Although the tax credit for home buyers expired in April, qualified home owners have until June 30 to close contracts. via CNBC
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Well, the Senate has extended the tax credit closing deadline for buyers already under contract as of April 30, from June 30 to September 30.
NAR has indicated as many as one-third of buyers would miss the June 30 closing deadline due to the high volume of loan applications. The extension is intended to enable these qualified buyers to remain eligible for the tax credit.
This is great news for home buyers who already have a ratified contract on the home they plan to purchase, but were getting bogged down in the deluge of loan applications.
Pending sales in our local market of Portland Oregon were down 50% in May 2010 when compared to April 2010. It appears that this is due to the tax credit pulling forward sales, much in the same way that Zero Interest Loans For Cars and Cash For Clunkers pulled forward auto sales. At the end of these types of programs, there is frequently a "hangover".