Is The Sky Falling For Real Estate?

In case you missed it, the National Association of Realtors said demand for single family homes dropped to a 15 year low as existing homes sales dropped a record 27%, the largest month over month decrease since 1968.
This comes as a surprise since many analysts expected a modest 13% drop.
In addition to the drop in home sales, inventory was up 12.5 months which is a record high.
Many Realtors are blaming the end of tax credit yet data shows sales were already falling in the past 3 months with the tax credit.
On a positive note, the median home price increased 0.7% year over year for the month of July.

Lawrence Yun, cheif economist for the National Association of Realtors expects the market to be “soft for at least two more months as the housing market works through the effects of the end of the tax credit.”

Existing home sales make up about 90% of the real estate market but it didn’t look so good for new homes either.

The Commerce Department reported this morning that new home sales fell 12.4% last month to the lowest levels on record.

New home sales fell 32.4% year over year.

My Take On This

Home sales had sored in March and April as home buyers rushed to take advantage of the federal first time home buyer tax credit of $8,000. This created a mini bubble in the housing market which inevitably burst once the tax credit expired. Robert Shiller, Economist at MacroMarckets LLC called the 27% drop an anomaly due to the expiration of the tax credit.
As many point at the tax credit for blame, I expect home prices to take a second dip but expect a modest increase in home sales for the next few months leaving the next 6 months as the best opportunity to buy real etsate.