Weekly Real Estate Market Commentary

Weekly Commentary

Let’s look at a few questions raised by this past week’s indicators.

1. The Existing Home Sales report contained an announcement that completed sales had increased in April by 7.6% month-over-month—23% above last year’s reading for April. One thing is obvious: This increase was fueled by homebuyers’ wish to take advantage of the $8,000 and $6,500 tax credit available to those who signed purchase documents by April 30 (and who close their transactions by June 30). One thing was not at all obvious: According to National Association of Realtors figures, sales varied greatly in different regions of the nation. Existing home sales (month-to-month) rose by a striking 21.1% in the Northeast, by 9.9% in the Midwest, by 8.6% in the South—but fell by 6.2% in the West.

All that can be said about this at the moment is that sales began to pick up in the West far ahead of the rest of the nation, especially sales of distress properties. Further, sales of distress properties have started to drop off in the West earlier than in the rest of the nation. And it is possible that the West is in an advanced stage of recovery, in which sales move to higher price levels and the market begins to look perhaps more “normal” than in the rest of the nation. None of this adequately explains why homebuyers didn’t rush out in large numbers to take advantage of the tax credit, however. Doubtless, we will all continue to seek an answer to this puzzle.

2. The Mortgage Applications Index surprised no one by running precisely counter to the Existing Home Sales Report. It was expected that the week in which purchase agreements had to be signed would also be the week in which loan applications would begin to fall off.

However, the 27.1% decline in the number of purchase money loans (with which homebuyers finance the purchase of their homes) was unsettling. The index figure of 192.1 is the lowest the index has reached during the whole recession. But if you look at how the index responded last fall to the assumed conclusion of the initial $8,000 tax credit program, you will find a great similarity between the moves of the index then and the moves of the index now. The shouting about a deep decline in real estate sales is overdone.

3. The week also brought us small disappointments. The number of claims for unemployment insurance rose, reversing a steady decline that had lasted for the past several weeks. And the Conference Board Index of Leading Indicators, which has been an enthusiastic indication of the recovery’s strength for months, fell for the first time in a year. Yes, it was only a 0.1% decline, but it seems to signal a slight slowing to the progress of the recovery. Moody’s Economy.com has been predicting this for some time—that the economy would slow, but continue to advance. If they prove to be correct (and they probably will), the slowing isn’t a big thing.