There is both a report from the NAR ( National Association of Realtors ) and Government sources showing that sales of existing homes are up 15.4 percent in the last quarter and that interest rates have just risen to over 5 percent for the first time in many months.
How could both of these things be happening at the same time. Things must be getting better. Lets take a closer look.
NAR statistics show only homes that have been listed through their network of realtors, they do not include homes sold at foreclosure auctions or private sales from banks or individuals have were not listed with a realtor. These sales have negative effect on prices in most neighborhoods around the country and in many neighborhoods , they make up the bulk of sales that are happening.
The result is that there are more overall sales of homes at still falling or stagnant prices and that a large percentage of these homes are being bought for cash by investors who are betting that these homes will not lose anymore value. Although the statistics show a quarter over quarter increase in sales of existing homes , the year over year sales numbers are virtually unchanged. So that means that a large percentage of homes is being bought up by investor/gamblers and not by prospective homeowners. These homes will turn into rental units for a while and overall , they are of no real help to the economy or sentiment as more and more rental properties in a neighborhood tends to depress prices.
Why would interest rates be moving up. In a word, banks are nervous that the Government is going to get out of the mortgage business and leave them holding their own bags. This makes them nervous and as a result , credit is drying up even more. You will probably see requirements for new loans get even tougher than they are currently. Items like higher credit scores and down payments of 25 to 30 percent will become standard in order to get a mortgage. Less and less people will be able to buy homes.
There are many ways to interpret how the above information will effect the economy and most of it depends on whether people have good jobs that they feel secure with. That is not the case at the moment and until it is, real estate will continue to languish and be a drag on everybody.
