June's existing home sales report was bad, but not as bad as analysts had feared it would be, with sales falling 5.1% to a 5.37-million-unit annual rate in the wake of the expiration of the home buyers tax credit, the National Association of Realtors said Thursday.
A Bloomberg survey had predicted that June existing home sales would fall 7% to a 5.26-million-unit annual rate. Existing sales totaled a 5.66-million-unit annual rate in May.
Although sales are up 9.8% from the 4.89-million-unit annual rate registered a year ago, the recent trend is clear: Existing sales declined as the end of the home buyers tax credit approached, then ended on April 30.
Sales for the month fell in three of four regions. They plunged 9.3% in the West, sank 7.5% in the Midwest, and declined 6.5% in the South, but rose 7.9% in the Northeast.
So Long, Home Buyers Tax Credit?
The compelling question now concerns whether Congress, which extended the home buyers tax credit program last fall, will renew it for a second time. NAR Chief Economist Lawrence Yun, said Realtors fully comprehend the dynamics of the current real estate market.
"June home sales still reflect a tax credit impact with some sales not closed due to delays, which will show up in the next two months," Yun said in a statement. "Broadly speaking, sales closed after the home buyer tax credit will be significantly lower compared to the credit-induced spring surge. Only when jobs are created at a sufficient pace will home sales return to sustainable healthy levels."
Meanwhile, home inventories increased 2.5% in June to 3.99 million units or an 8.9-month supply at the current sales pace. That's up from an 8.3-month supply in May, a rise that would seem to support the argument for a renewal of the tax credit.
However, the median sales price for all types of housing was $183,700 in June, up 1% from a year ago.
The median sales price for a single-family home was $184,200 in June, up 1.3% from a year ago. Median single-family home prices by region were as follows: Northeast, $244,300, down 1.2% from a year ago; Midwest, $155,900, down 0.1%; South, $163,600, unchanged from a year ago; and the West, $221,800, up 1.5%.
The median sales price for a condominium was $180,100 in June, down 1.4% from a year ago.
Dueling Perspectives On Housing Stimulus
Economists have been split over the appropriateness of the home buyer tax credit almost since the program was first proposed about a year ago.
Conservatives generally argue that the tax credit doesn't stimulate the economy on a net basis because it simply takes sales that would have occurred later and brings they forward, resulting in no new net gross domestic product. By and large, these economists say the housing market should be left to recover on its own, regardless of the slumping real estate sector's impact on U.S. GDP.
Conversely, economic liberals generally argue that the tax credit brought Americans into the housing market who probably would not have bought homes at all without the credit, resulting in an net increase in commercial activity. They also say the economic activity around the home sales, when combined with other government stimulus programs, contributes to a critical mass of commercial activity needed for the U.S. recovery to advance to a sustainable expansion status.
Still, economic stimulus arguments aside, political reality may rule the day on Capitol Hill, as it often does. Stung by investors' concern over the European debt crisis and U.S. voters' concern about the deficit, Congress is shifting to more of an austerity posture. From that position, legislators are more likely to seek budget cuts and tax increases to decrease the U.S. budget deficit, a stance not conducive to renewing a large subsidy such as the home buyer tax credit program.
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