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July 1st, 2009 2:04 PM by David W. Welch
It is July 1st, and we are half way through the year. So far we have seen house prices as measured by the median sales price drop pretty significantly. At the same time we have see interest rates at historic lows, and tax credits for first time home buyers. The result of the low prices, low interest rates and first time buyer incentives has been a dramatic increase in sales. The sales don't even paint the whole picture because the number of pending sales has skyrocketed. There are currently over 7,000 contracts pending, and I know they will not all close. If only half of them closed our sales numbers would be better by about 500 transactions each month. The banks' inability to get short sales approved, REO's cleared to close and loans finalized has been a big impediment to closing deals. Add to this the new HVCC regulations, and getting contracts to closing has been the single biggest hurdle.
In the next six months, I expect to see the pace of contracts and sales to continue at a fairly high pace through the summer before slowing down in the last quarter of the year. We should see a big push in October as first time home buyers take advantage of the tax credit before it expires at the end of November. I do not expect to see prices moving very much in either direction for at least the next six months as inventory has continued to drop. Interest rates however, will begin to climb by the fourth quarter as the Fed's policy of buying up mortgage backed securities begins to slow. I don't know that they will have to begin raising their rates before the year is up, but it is likely. The economy will almost certainly begin to improve, although employment numbers will not begin to improve before next summer. In a nutshell, the next six months is probably not going to look much different than the last six months in a lot of ways. I am hopeful that banks will begin to loosen up a little, so that we can get transactions closed. The sales pace will probably slow a bit as the great deals get bought up. If interest rates begin to go up, watch for the sales pace to improve as well. I see the light at the end of the tunnel, but it is still a long tunnel.
Orlando Real Estate, David Welch Real Estate Optimist