Home Sales Fall in May As Federal Tax Credits Expire

The US housing market appears in danger of another crisis which could further hinder the recovery of the overall economy. Sales of previously owned homes fell in May as the federal tax credits for home buyers came to an end. In addition, nearly a third of all May sales came from foreclosures or other distressed properties, meaning prices may take another plunge after having stabilized over the last year.

May’s sales came in at a seasonally adjusted rate of 5.65 million, a 2 percent drop from April. Analysts fear that sales will fall even further in the next few months when the tax credits are gone. The majority of analysts, however, do not expect the struggles in the housing market to force the nation back into recession. After a summer plunge in housing sales fall is expected to bring rising sales as unemployment starts to fall.

Since last January, when existing home sales bottomed out at 4.5 million, sales have climbed 25 percent. They are, however, still 23 percent below the 7.2 million annual rate set at the peak of the housing boom in September 2005. The reports count home sales after closing, meaning that the paltry sales were actually still boosted by the tax credits. In order to qualify, buyers had to have signed a purchase agreement by April 30th, but have until June 30th to close.

Analysts had expected the tax credits to boost sales in both May and June. The National Association of Realtors claims that delays in the mortgage process have put close to 200,000 buyers in jeopardy of not closing in time to qualify for the credits. The group is currently pressuring Congress to extend the closing deadline to September 30th.

Realtors nationwide are reporting a slowdown in showing homes, which is a troubling sign for sales in the coming months. Also a potentially troubling sign id the number of foreclosures and other distressed properties. Such sales accounted for more than 30 percent of May home sales, and could rise in coming months as the government’s efforts to help homeowners save their homes have had only moderate success.

The Obama Administration’s $75 billion mortgage modification program has seen more than a third of the 1.2 million homeowners who have signed up for the program drop out, while just over 26 percent have actually seen the program deliver a loan modification and are back on track.

The May sales plunge affected the Northeast the worst, with sales dropping 19 percent in the region. The Midwest saw home sales remain unchanged from the previous month, while the West and South enjoyed small rises in sales. The inventory of homes on the market dropped slightly to just under 4 million, which would take 8.3 months to exhaust at the current pace of sales. A six month supply is considered healthy for the market.

First time buyers, drawn into the market by the expiring tax credit, accounted for just over 45 percent of sales. The median sales price for May was just under $180,000, about 2.8 percent higher than in May 2009.

Locally, the Marin real estate market has seemed to have cooled. Even though the tax credit did not mean that much to potential Marin homebuyers, there still has been a rather sharp decline in home sales.

5 Ways to Prepare Your Home for a Faster Home Sale in the Future

When you list your home for sale the goal is to sell it as quickly as you can and for the most amount of money possible. If you prepare for the home sale now then you won’t have much to do when it comes time to list it. This will ensure there are no unnecessary delays and it will help relieve much of the stress that a home sale typically creates.

1. Pay for a Formal Inspection – If you are going to create a to-do list it might as well include any major issues that need to be addressed. You will likely have to take care of these things before closing on the home sale, so there is no point waiting until you are in the middle of a sale to find out what the inspector will flag.

2. Address Repairs – If you start preparing now, you should not have any repairs to take care of when it is time to list. So, go through and make a list of how many window screens you need to fix and which closet doors need a little TLC to get them back on track.

3. Consider Upgrades – If your competition tends to have modern kitchens and a spa-like master bath, you may want to consider renovating where needed. If it is not in the budget to completely renovate then make some upgrades with fresh paint and new hardware and lighting.

4. Invest in a Home Warranty – If you are scratching your head and saying you did not know such a thing exists, you are not alone. Surprisingly, many people are unfamiliar with home warranties, but they can be very helpful. Rather than spending your day off calling around to compare pricing and availability of technicians, plumbers, etc. pay a small co-pay and your warranty will handle all this for you.

5. Decide on an Agent – Choosing an agent is an important piece of the home sale process, so it is surprising that so many people just jump in and hire the first person they talk to. When you prepare early, you don’t have to feel rushed into making this important decision.

Waiting until the last minute to handle everything on this home sale list will only bring chaos and stress to your schedule. Create a to-do list, have an inspection done, and take your time hiring the right realtor for the best possible home sale experience.