Home Sales Poised to Dip Again

Although home sales surged last month, many housing experts–and even real estate agents’ own trade group–are expecting the market to retrench in the coming months as the jolt from a tax incentive’s previously impending deadline subsides.

Some observers say the rush to finish transactions before the tax credit’s original deadline may keep home sales elevated in November as well. But there are signs that sales may take a hit from there. The Mortgage Bankers Association’s seasonally adjusted purchase index for the week ending November 6 dropped to its lowest mark since December 2000. “We expect home sales to give back some of the extraordinary increases posted in recent months,” economists at Goldman Sachs said in a report. As the jolt from the tax credit scramble fades, even the National Association of Realtors is lowering expectations. “With such a sale spike, a measurable decline should be anticipated in December and early next year,” NAR Chief Economist Lawrence Yun said.

2010 Outlook:

The first-time home buyer tax credit has persuaded some buyers to make their purchase sooner than they otherwise would have, and at some point, the market will take a hit reflecting that. The first tax credit shifted sales from 2010 into 2009, and the second will shift sales from the second half of 2010 into the first. It is projected that sales will drop in the first quarter of 2010, payback from the first tax credit. Sales will take a second hit in the third quarter of 2010, payback from the second tax credit. Overall, sales in 2010 are expected to be about the same as in 2009.