Money Matters, Simplified.
Home sales decline to 7-month low--report
by Jaspreet Virk - February 27, 2010 - comments
The sales, which have plummeted to a seven-month low, indicate that the housing market is still very weak.
Dashing hopes that the housing sector is rebounding, a report released Friday shows that the sale of previously-owned homes slipped in January, stumbling for the second month consecutively.
As per the report by National Association of Realtors, the sales of homes fell 7.2 percent to 5.05 million last month, compared to December.
Though the sales are 11.5 percent higher than reported in January last year, they are at their lowest since June.
The existing homes sales fell in every part of the nation. The Northeast witnessed the biggest decline, which was 10.9 percent.
In South, the sales fell 7.4 percent. In Midwest and West, they dropped 6.9 percent and 5.2 percent respectively.
Explaining weak sales
The sales, which have plummeted to a seven-month low, indicate that the housing market is still very weak.
This weakness is largely related to high level of unemployment and declining consumer confidence.
According to Reuters/University of Michigan survey, consumer sentiment index fell to 73.6 in February from 74.4 in January, fueled by rising concerns about uncertainty in the job market.
"The housing sales numbers are weak because we have a weak labor market, and when that improves we'll see people buying and selling homes,” stated Patrick Newport, an economist at IHS Global Insight.
Many analysts believe that this large decline is also the result of $8000 tax credit for first time home buyers, which was due to expire on Nov. 30.
This tax credit pulled many people into the market in the month of September and October. This indeed led to a surge in home sales, but many people cut their potential purchases for the months ahead.
Analysts upbeat about future
Since the administration has extended the last date for availing the $8000 tax benefit till April 30, analysts are expecting the home sales to surge in the upcoming months.
Further, a government report released recently shows that U.S. economy grew faster than expected in the fourth quarter.
Surpassing economists’ expectations, the gross domestic product (GDP) grew 5.9 percent from October to December, economy’s best performance in six years.
The growth was largely due to increase in private inventory investment, exports, and personal consumption and expenditure.
As the economy is bouncing back to growth, the job scenario is expected to improve in the nation. In turn, it will boost spending on goods and services, including the big tickets items like homes.