December was not a prosperous month for previously owned home sales. The rate of decrease was down 16.7% to 5.45 million. This drop is considered to be the biggest drop in 42 years, the National Association of Realtors said. Another concern is regarding the government policies that are set to expire.
Most of the purchases that have taken place are taking advantage of the $8,000 tax credit. Reports show a huge increase in home sales in November, when the tax credit was set to expire. Once the credit and other governmental assistance no longer exist, individuals will not have the extra help or push that has been provided to purchase a home. Mark Zandi stated “”It does highlight a broader point that the housing market is on government life support, and when it is taken off that support, it weakens.”
The tax credit is set to expire April 30, 2010, once this occurs it is believed that home sales might decrease. Economist, Lawrence Yun stated that sales are set to rise again the same way they did in November when the tax credit was originally scheduled to expire. He did mention that factors such as unemployment and foreclosures might alter the high expectation of the housing market. Job creation and stability are huge factors in the housing market recovery as well as the entire economy.
Research done by MDA DataQuick of San Diego found that homes in the Southern California, San Francisco Bay Area and statewide housing market followed through in December. Part of this reason is due to the high demand of investors in these areas for the foreclosed homes and short sales available.
After the bubble burst of the housing market, many more investors have a mindset that the value of homes will eventually pick up again and when it does they are going to profit immensely.
With rates moving back up, buyers seem to feel threatened because reports show that the Los Angeles area had an increase in the amount of sales in December and first two weeks of January. Deputy chief economist, Robert Kleinhenz stated that the affordability factors seemed to have improved compared to a few years ago, which is great news for the market.
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