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2.7%  Q1 GDP    4.57%  avg. 30-year mortgage     9.5%  Unemployment

Existing home sales take surprise tumble

Sales of existing homes dropped 2.2 percent in May compared with April, surprising forecasters who expected a 6.6 percent rise, according to data released moments ago by the National Association of Realtors.

Honestly, it seems hard to write that anyone should be "surprised" there was a drop in sales. Remember, the government-subsidized home-buyer credit, which already had been extended, expired at the end of April. The real estate market has been artificially supported by the federal government for nearly a year now and, with unemployment still near 10 percent, it should be no surprise that when the government subsidy leaves the home-buyer market, so do the buyers. Economists expected the subsidies to have a longer tail than they did.

This is like cash-for-clunkers, but with houses instead of cars. These sort of government subsidies do little than pull future sales forward. As such, we haven't been able to get a real read on the housing market without artificial supports. Some more grave forecasters say residential real estate could fall into a double-dip without the supports.

All this being said, sales of existing homes in May 2010 were up 19.2 percent compared with May 2009, which is a terrific number, but remember, May 2009 was a terrible month for home sales.

The median sales price of an existing home was up 2.7 percent compared with May 2009, coming in at $179,600.

There's an 8.3-month supply of unsold homes, or what real estate folk call "inventory." A healthy real estate market maintains an inventory of about six months.

Glenn Kelman, president and CEO of the Redfin real estate brokerage company, said of the tax credit's expiration: "We have seen every market immediately feel the effects."

California is in "the final frenzy of its tax credit," which offered $10,000 to first-time buyers, Kelman said,according to my colleague Elizabeth Razzi, our real estate editor, who interviewed him.

Kelman said the tax credit borrowed buyers from the summer, and possibly into the rest of the year. "I think it's going to be a slow fall," he said.

An hour into the trading day, stocks are trading in a narrow range, slightly in the red.

The Dow is down 0.12 percent.

The broader S&P 500 is down 0.2 percent.

The tech-heavy Nasdaq is up 0.17 percent.

By Frank Ahrens  |  June 22, 2010; 10:36 AM ET
Categories:  Data  
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The tax credit does not expire until June 30 for closings; April 30 was the deadline for writing contracts, so wouldn't sales not be affected by the loss of the tax credit until July?

Posted by: VAjyd | June 22, 2010 11:23 AM | Report abuse

the experts have boasted to us that there will be no "double dip."

the experts lie, people.

this is real.

it's not just housing, it's everything.

Posted by: potomacfever00 | June 22, 2010 11:54 AM | Report abuse

I just bought a home for $700k on the premise that house prices will always go up and that the government will come to my rescue if I can't repay ....

Get all these experts out who said -- housing has recovered and we were dancing at the bottom -- looks like I will have to do a short-sale soon ... it's really good that I have no money of mine in this deal!!

Posted by: free_np | June 22, 2010 12:04 PM | Report abuse

Obama lied and home ownership died.

When headlines read:
"Borrowers exit troubled Obama mortgage program"

In the State where Obama traveled ( at great taxpayer expense) to sell his apparent lie, you know what happened.

Read the full story here:

Posted by: dottydo | June 22, 2010 12:30 PM | Report abuse

The reality is China pulled it's alignment with the US Dollar yesterday, so Maxwells silver hammer coming down has turned to a gold standard as the full depression begins.
Preppers depression are the only Americans who are ready.
Many are investing in homes in Arizona to hold the border away from the AZtlan builders trying ( apparently with Obama's help) to annex the 48th State to Sonora Mexico.

Posted by: dottydo | June 22, 2010 12:34 PM | Report abuse

More good news from the Obama economy. Thanks Obama! We can do it, yes we can!

Posted by: liberalsareblind | June 22, 2010 12:55 PM | Report abuse

We still have a fundamental liquidity problem.

Banks were given 750 Billion in taxpayer money, which they sat on.

They are still being subsidized by the taxpayer with near 0% money which they are loaning out at 20-30% taking a huge bite our of taxpayers meager paychecks which haven't realized productivity gains in the economy for over a decade.

20-30 million people are searching for jobs that don't exist, have little possiblity of existing in the future.

No one acknowledges the price distortions in the real estate market brought about by a flood of illegal drug money flushing through the real estate market brought about by increased production into the multi-millions in Afghanistan, and improved distribution when the sales component of Columbian drugs moves up to Mexico.

But all of these factors have a long term depressing effect on home sales.

And since no one is addressing in any meaningful way, the job shortage, liquidity bottlenecks, nor the consequent decrease in real estate values, there is little likeliehood of turnaround in trends.

China allowing some freer float of its currency is the only bright spot in this scenario.

Posted by: bozorecon | June 22, 2010 1:18 PM | Report abuse

The get the federal tax break, you had to be under contract by April 30th.

Posted by: JG08 | June 22, 2010 4:21 PM | Report abuse

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