Last week we learned that the recession had ended. Now experts say the “worst of the housing crisis appears to be over.” New home sale figures for August are set to be released today, and most people expect them to be up from July.
What is the optimism about housing sales based on?
Existing home sales jumped last month by 7.6 percent, according to the National Association of Realtors (NAR). Sales are weak compared to a year ago, but significantly better than in July.
The July figures may have been exaggerated because the federal homebuyer tax credit (which saved buyers up to $8,000) ended. Everyone who was in the pipeline to buy a house may have done so previously.
But now, an increase in sales may be a real reflection of demand that isn’t influenced by a tax incentive. At the same time that sales were increasing, home prices also inched up.
There is every reason to believe the trend will continue because interest rates now stand at 4.37 percent for a 30-year fixed mortgage, which is near an all-time low. And the inventory of houses is shrinking, which, if the trend continues, will drive up prices further.
“The report was the second this week giving a sign of stability for the beaten-down housing sector. The Commerce Department said housing starts in August rose a better-than-expected 10.5%. Still, the gain in starts was driven partly by apartment construction, a sign demand for housing could be shifting from purchases of houses to apartment rentals. Analysts say recovery of the housing sector will take a long time.”
Forbes.com’s Sy Harding was pessimistic about the existing home sales number:
“Even a 7.6% improvement from July’s horribly depressed level makes August the second worst month on record, and has existing home sales so far in the third quarter running at a 29% slower pace than in the second quarter.
“First let’s compare August sales to a year ago. In August of last year, existing homes sold at an annualized rate of 5.1 million homes. Today’s report was that this August they sold at an annualized rate of 4.1 million homes, down 19.6% year over year. This is a continuing recovery from last year’s recession? I don’t think so.”
The Board of Realtors provides market-specific data for 19 metro areas. In some areas, such as Phoenix, home sales have not improved a bit.
So, should you buy or rent, given the market? Earlier this year, The New York Times came out with an online calculator to help you figure out which answer is right for you.