Maybe you had an open house last weekend and nobody came. You weren't alone. The number of people buying homes fell steeply in May, according to one of the first reports to describe home buying activity for the month, an index of mortgages applications to buy homes.
The Purchase Index for May from the Mortgage Bankers Association
, hit its lowest level in more than a year. This marks a huge turnaround from earlier this spring, when demand for housing went through a mini-boom ignited by the expanded $8,000 homebuyer tax credit.
That mini-housing boom is over now, and we're just beginning to see how deep the mini-housing crash that follows is likely to be.
To take advantage of the homebuyer tax credit, most buyers needed to sign a contract by April 30, and they'll need to close the purchase of their home by the end of June. So it makes sense that reports such as Pending Homes Sales, which records the volume of contracts signed, showed big numbers for April
, just before the April 30 deadline. Pending Home Sales also showed almost the same big numbers last fall, when the homebuyer tax credit got close to its first expiration date.
After the deadline passed for the tax credit last fall, home sales crashed. Now it's happening again.
The Purchase Index from the Mortgage Bankers Association is one of the first measures of activity after the April tax credit deadline. It fell every week in May with an average seasonally adjusted index number of 205 for the month, down nearly 20 percent from April.
So, how bad is this news?
, vice president of research and economics for the Mortgage Bankers Association, is not panicked by the falling demand in May, any more than he celebrated the rising demand in April.
"It's roughly the same magnitude as the decline we saw last fall," Fratantoni told HousingWatch. He expects the number of mortgage applications toward home purchases to rebound in June, to match what the Mortgage Bankers Association reported in February and March, after adjusting for the season.
"The largest effect of the tax credit was to move some sales forward in time," he says. Home sales that would have happened in the summer were pushed into this spring, as homebuyers rushed to get the tax credit.
That will mean a summer of mixed messages for housing watchers. Expect the May pending homes sales report to crash after the April tax credit deadline to sign a contract; that report will come out July 1.
The May and June reports for new and existing home sales should both stay high, as home sales in contract make it to the closing table. But expect those sales figures to drop in the July report, since they come right after the tax credit deadline to close a sale by the end of June.
Despite the mixed messages, Fratantoni still thinks the homebuyer tax credit was worth it. Economists including Fratantoni say 100,000 to 300,000 people bought homes because of the first tax credit last fall who would not have bought otherwise. The tax credit this spring should have a similar net positive effect.
The backlog of unsold properties is the biggest thing holding back the housing market, according to economists like Fratantoni. Banks seized a record 92,400 properties in foreclosure
last April, according to RealtyTrac
. If each homebuyer tax credit took at least 100,000 homes off the market, that's at least 200,000 additional homes sold -- the equivalent to absorbing more than two months of foreclosures
Taken all together, from continued high foreclosures to the beginning recovery in the rest of the economy, Fratantoni expects a a recovery for housing to take a long time.
"It's going to be a slow, uphill climb," he says. " Not a robust recovery."