After Some Unwelcome Data, Housing Recovery a Little Less Certain

• September 25, 2009
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by Will Smith

The Commerce Department recently published its monthly report on new home sales, which it pegged at an annualized rate of 429,000. While the figure is up 0.7 percent from July, it was shy of the 440,000 that analysts were expecting and so was greeted with disappointment. In other not-so-good news, the National Association of Realtors reported that sales of existing homes declined 2.7 percent from July to August, marking the end of a four-month rally in existing home sales.

While this disappointing data is obviously not welcome news, one month does not constitute a trend. It remains to be seen whether this is a hiccup in the housing recovery, or a sign of a more serious issue.

Some economists interpreted the slackening demand as a result of the expiration of the $8,000 first-time home buyer credit. While the credit doesn’t formally expire until November 30th, they argue that most people who wanted to take advantage of the credit already have, and so we are already seeing a dip as a result of the credit effectively coming to an end.

Another interpretation of the data is that while it is ostensibly bad news, the real estate industry might be secretly pleased. A loss of momentum in the housing recovery will make the Obama administration and lawmakers more receptive to extending and/or expanding the tax credit, which powerful groups like the NAR and National Association of Home Builders have been lobbying for aggressively.

For the latest analysis on whether the credit will be extended, see Kenneth Harney’s column at The Washington Post.

This article originally published at http://dc.urbanturf.com/articles/blog/after_some_unwelcome_data_housing_recovery_a_little_less_certain/1351

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