Sales of previously owned homes fell unexpectedly in May as delays in processing mortgage applications hampered the closing of contracts benefiting from a popular homebuyer tax credit, an industry group said on Tuesday.
The National Association of Realtors said sales fell 2.2 percent month over month to an annual rate of 5.66 million units from an upwardly revised 5.79 million-unit pace in April.
Analysts polled by Reuters expected May sales to rise 5.5 percent to a 6.12 million-unit pace from the previously reported 5.77 million units in April.
Unexpectedly? Who didn't expect to see existing home sales fall in this economic climate? There is oil spewing in the Gulf. Small businesses face enormous uncertainty over the recently passed healthcare legislation. Banks face enormous new regulatory challenges and uncertainty from the new financial reform legislation. The oil and gas industry is reeling from an arbitrary six-month moratorium on offshore drilling. And to top it all off, the regime is pushing for another bite at the cap-and-trade apple.
Who are these "analysts" polled by Reuters, and what Ivory Tower are they living in? While home sales were up over the same month last year, the regime has created such a toxic climate of uncertainty that no self respecting, competent economist could predict anything other than continued volatility or continued weakness. This is not an economic climate that fosters growth. It is a climate that causes businesses and consumers to reduce risk and minimize exposure to uncertain future risks. Reuters blames bank processing delays in stalling applications. I think it's much more likely that both banks and consumers are taking a wait and see approach, and are holding off taking on the additional debt of new mortgages.
UPDATE: The e21 blog has a great analysis here, concluding that a day of reckoning must come to the real estate market. The so-called "shadow inventory" of existing homes (homes held in foreclosure by banks and not yet on the market). e21 also notes a NY Times piece on one reason for banks' reluctance to lend.
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