August 23, 2010 (Chris Moore)
The sales of new homes fell last month fell to the lowest level on record. It was the latest indication that home sales are stagnating after the expiration of a homebuyer tax credit this spring.
New home sales fell 12.4% in July to an annual rate of 276,600, the Commerce Department reported. That was the slowest pace on records dating back to 1963 and worse than the pace forecast by economists polled by Thomson Reuters. A day earlier, the National Association of Realtors said sales of existing homes, a far greater proportion of the housing market, fell to a 15-year low in July.
Despite the ultra-low borrowing rates, home sales have been weak since a home buyer tax credit expired at the end of April. High unemployment has kept people from buying homes, and banks still reeling from the crisis in the mortgage-backed securities market have been cautious in making new loans.
Homeowners could see a further weakening of their home’s value if this trend continues and supply increases. Further complicating the problem is the amount of foreclosures also coming on the market. If prices were to weaken it could cause a new spike in foreclosures as more and more homeowners go “underwater.”
The winners are prospective home buyers who along with low mortgage interest rate, could start to see bargain basement pricing.