December Home Sales an Ominous End to 2009 - By: David Abernathy

The year 2009 ended on less of an upswing for the real estate market than many people across the country would have liked to see, considering the amount of money that the government has spent to support the housing market; but only time will tell how the end of the year numbers will affect the first quarter of 2010.

While government programs strove to hold up the less than enthusiastic winter housing market, the sales numbers for December showed the most significant monthly drop since 1999; even when the numbers are adjusted for seasonal variation, that’s a big reduction in sales. The numbers tallied after the end of the month were expected to be lower than the previous month, but the extent of the fall wasn’t anticipated to have been so extreme.

Home sales took a nosedive in December with sales falling 16.7% (unadjusted) and even mortgage applications for purchasing new homes were at very low levels. Some of this trend is likely due to the fact that many home buyers were looking to complete their home sales by the end of the November 30 cut off date that the tax credit had originally been scheduled for. Another reason why December home sales were likely very low is the combination of the holidays and winter drop in home sales in combination with poor weather conditions across much of the nation.

How does this bode for the spring market? The home buyer’s tax credit program is ending April 30th, though the extension seems to have had less of an effect on the market than the initial program did; there is still a lot of time for home buyers to take advantage of the extension. Experts say that we’re likely to have an increase in home sales this spring as the season changes as more people are looking to take advantage of the low interest rates and home prices.

The approaching end to the Federal Reserve’s program of supporting mortgage-backed securities may well encourage anyone who’s thinking about buying a home to get the process started so that they can procure a mortgage before the March 31st cut off date, after which there may be some market correction in the mortgage industry resulting in higher interest rates. There is a lot of speculation about how the market is going to react in the spring when the government tax credit program ends and the Federal Reserve program stops holding down the interest rates, but in all actuality it’s hard to hazard a guess as to what the reaction will be. Home buyers would be wise to take advantage of the programs now while they can.

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