May 25, 2010

It appears as though Americans purchased homes at a high rate in April, but if you think this means that the housing-market is on an upswing, you should think again.

Yes, the National Association of Realtors reported on May 24 that sales of previously owned homes rose an unexpected 7.6%. But it appears as though the increased number of sales was due in part to the expiration of the tax-credit.

So, we were taking money from one pocket, and putting it into another pocket. This means that the people who were purchasing were ready to purchase, but they moved their “buy date” up by a few months. As such, opposed to purchasing over the next year, there was a large number of sales all at once.

Looks like this could mean a slump over the coming months? Thoughts?

According to

Indeed, first-time buyers accounted for nearly half of the homes purchased in April. Buying has also been spurred by historically low mortgage rates, which have been kept modest by the Federal Reserve’s recently expired $1.25 trillion mortgage-securities purchase program and by lenient lending standards at the Federal Housing Administration (FHA). In all, the US government, through Fannie Mae (FNM, Fortune 500), Freddie Mac (FRE, Fortune 500) and the FHA, underpins about 95% of the mortgage market. “This is a market purely on life support, sustained by the federal government,” noted FHA’s head, David Stevens, at the Mortgage Bankers Association conference yesterday. His agency is tightening lending — which could take more buyers out of the market.

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