The mysterious plunge of existing-home sales

*Expiration of tax credit April 30. Source: NAR

What happened to existing-home sales? In three words: tax credit expiration.

But nothing’s quite that simple. Here’s how Lawrence Yun, the chief economist for the National Association of Realtors, explained it: “Consumers rationally jumped into the market before the deadline for the home buyer tax credit expired. Since May, after the deadline, contract signings have been notably lower, and a pause period for home sales is likely to last through September.”

Existing-home sales declined 27.2% from June, and 25.5% from a year ago. Still, the NAR expects 5 million total for the year, ahead of the 20-year average.

An even longer answer came from Bernstein Research, publisher of a research note called “Waking up to the morning after,” a perspective on the post-tax-credit home improvement market. In it, analysts pointed to the pull-forward of demand from the expiring tax credits, the result of which “could cause turnover to remain negative over the next six to 12 months.”

It’s not only sales, of course. July’s actual, non-adjusted estimate for starts was the lowest figure for that month since 1959. Hence the Bernstein phrase: “shallow slope of recovery.” At least it’s a recovery.

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