The nine-consecutive monthly increases in pending homes sales finally came to an end in November as potential first-time home buyers rushed to beat the expected expiration of the first-time tax credit.
This index designed to forecast future existing home sales fell a steep 16.0% to 96.0. A decline had been widely anticipated. But the severity of the drop caught some analysts by surprise, and Treasury bonds rallied on the news.
Predictably, Lawrence Yun, the chief economist for the National Association of Realtors, said, “It will be at least early spring before we see notable gains in sales activity as home buyers respond to the recently extended and expanded tax credit.”
Other analysts are less certain and believe the much of the demand from first-time buyers was absorbed before the originally-expected expiration of the $8,000 tax credit on November 30.
However, Congress authorized a $6,500 tax credit for buyers who have been in their homes at least five years, and mortgage rates remain near historic lows, which will likely support the beleaguered housing industry.
Although the outsized pullback is a little disconcerting, pending homes sales remain 15.5% higher versus a year ago, lending support to the argument that the housing industry has bottomed.
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