A cloudy week in real estate
Some gloomy numbers loomed over the real estate market this week when national home sales and prices dropped, while mortgage rates creeped up.
“Demand to buy homes is really weak,” said Patrick Newport, economist at IHS Global Insight.
While U.S. Department of Housing and Urban Development’s report of new single-family homes sold isn’t considered significant, given its huge margin of error, it still showed a national decline in home sales of 11.2 percent to 309,000 in January, from 348,000 in December. It’s a 6.1 drop from January 2009′s 329,000 home sales.
But locally, the situation isn’t as grim.
The Midwest was the only region to post an increase in new single-family home sales last month with a rise of 2.1 percent to 49,000 in January over the year ago month’s 48,000 sold, according to the Department of Housing and Urban Development. But economists call the measurement too volatile and don’t put much stock in a month-to-month number. Instead, they look at trends.
Year-over-year, Midwest sales were down 7.5 percent from January 2009, when 53,000 homes were sold.
The first-time homebuyer’s tax credit of $8,000 has been attributed with improving sales numbers since it was implemented last year. It was extended in the end of November and will now expire at the end of April.
“I saw a surge in the market on Dec. 1,” said Michael Poland, senior mortgage banker at Baird & Warner Financial Services. 
January was a record month for pre-approvals for Poland, who cited a 55 percent increase in January to 38 pre-approvals, from 21 in December. It has declined slightly in Feburary to 25. Winter months are typically very slow though, he said.
In Chicago, single-family home prices continued to drop for the third consecutive month in December, according to the Standard & Poor’s/Case-Shiller home price index, which measures a three-month moving average and reflected prices from October, November and December.
Chicago prices dropped 0.6 percent on a seasonally adjusted basis in December from the previous month and 7.2 percent year-over-year, according to the report. It was the biggest drop in the 20 cities that the index covers.
But neither Poland nor Newport felt that the dip in prices had a strong effect on sales.
The index as a whole rose a seasonally adjusted 0.3 percent in December from the month earlier, putting national prices around their summer 2003 levels. Prices went up in 15 of the cities.
The extension of the first-time homebuyers $8,000 tax credit–what some call a second round of stimulus for the housing market–doesn’t seem to be taking a uniform effect nationally.
“The first tax credit exhausted the pool of first-time homebuyers,” said Newport.
Unlike Newport, the Baird & Warner banker has seen more interest in the homebuyers tax credit this second time around, but is worried about what happens when the tax incentive ends.
“But I don’t know what the summer is going to look like,” said Poland.
To make things more grim, rates for 30-year fixed rate mortgages rose above 5 percent to 5.05 percent for the first time in three weeks, according to a Freddie Mac survey.
Tags: home prices, home sales, mortgage, real estate, tax credit
