Per this Associated Press article in yesterday’s Globe and Mail, US home sales “collapsed” in May, with sales tumbling a staggering 33%. This is due to the government’s stimulative tax credit – part of the recovery package – expiring. April 30 was the last day for buyers to take advantage of the $8,000 credit for the purchase of a new or existing house.
The analysts seem to all have envisioned a drop, just not a drop this bad – the worst since records began being kept in 1963. Mike Larson, an industry analyst, writes: “… this decline takes your breath away.” Unfortunately, the analysts must be having a time of it these last couple of years – every bit of bad news is entirely unexpected. This remarkable stumble in housing sales, though fully taking its timetable from a government program, was no exception.
However, many in the punditry claim that, in fact, this result should have been entirely predictable. Their line is that since credit availability is tighter than ever and that there are fewer qualified buyers than ever, all the government’s tax credit did was accelerate the purchases of a group of people who would have bought homes regardless, squishing, in effect their purchases into a shorter time frame.
David Berman from the Globe and Mail, posted a video yesterday explaining some of these data and tied them in with the morning’s stock market losses – which didn’t really amount to much by the end of the trading day, however – the North American indexes were slightly higher by then.
Berman goes on to talk about the Commerce Department’s anticipated actions as well as those by the Federal Reserve Bank. The Fed, for its part, released a report from its two day meeting almost simultaneously with the horrendous housing report. The Fed truly seems to be trying to reassure the markets and consumers, saying that it expects to keep interest rates “exceptionally low,” for an extended period of time.
On the polar end of the scales, The Bank of Canada has raised interest rates for Canadians and, while a experiencing a dip of our own, Canada home sales remain relatively stable.
