[Housing Market] Life After the Tax Credit? By: Sara Sutachan, senior research analyst
After dipping briefly below the 500,000 mark in April, sales bounced back strongly in May, to a seasonally adjusted annualized rate of 552,800 for single-family detached homes, increasing 14.1 percent from April and 1.2 percent from last May and registered the highest sales pace in the last five months. The current surge in home sales was due in large part to the delay in escrow closings for many first-time buyers who wanted to close in May to take advantage of both the state and federal tax credits.
However, the numbers of properties that went into contract during the month of May dropped 16.9 percent compared to April. That was consistent with expectations that activity may decline once the federal tax credit deadline passed. Looking forward, we can expect the flurry of sales dealing with tax credits to subside somewhat. However, with the state’s unsold inventory index at very lean levels (4.6 months in May, well below the long-run average of about seven months) and with mortgage rates expected to be favorable, prices should remain steady or perhaps even increase in the coming months.
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