Americans will celebrate Independence Day this weekend, but recent housing data hasn’t given much cause for celebration.  The housing market hasn’t been very independent either, relying upon federal tax credits and artificially low mortgage rates over the past year.  Since the tax credit expired, housing activity has dropped off considerably, and by most recent measures the trend is likely to continue in the near term.

Earlier today, the longest tennis match in the history of the sport finally came to an end after an unprecedented 11 hour slog that played out over 3 days at Wimbledon.  Comparing an epic tennis match to the housing market may be a stretch, but seeing updates on the exhausting marathon was reminiscent of the seemingly never-ending challenges the real estate industry has endured over the past several years.  And similar to the roller coaster of match points and held serves, just when it appears the housing market is on the brink of emerging victoriously from the downturn we wind up back at deuce.  Most recently, both new and existing home sales posted disappointing declines in May following the expiration of the federal homebuyer tax credit at the end of April.

There are now a number of indications that housing has fallen back into a lull since the federal homebuyer tax credit expired at the end of April.  Purchase mortgage application activity fell for five straight weeks following the expiration of the tax credit.  Starts and permit data released on Wednesday further solidified the notion as construction activity fell sharply in May.  Building permits also plunged for the second straight month which suggests that future construction is likely to slow further.  These developments along with fresh concerns regarding an economic recovery also caused homebuilder confidence to sink in June.  The National Association of Homebuilders Housing Market Index posted its largest single-month drop in June since August 2006, falling five points to a reading of 17.

The federal homebuyer tax credit expired at the end of April for home purchase contracts which must be closed/settled by the end of June.  Now there is mounting concern about how much demand had been forwarded into April from the coming summer months.  According to the Mortgage Bankers Association, purchase application activity has declined for five consecutive weeks since the tax credit expired.  Their seasonally-adjusted purchase index is at its lowest level since December 1996, and this despite near-record low mortgage rates.  If that is any indication of where housing demand currently stands, the housing market could be in for a rough summer. 

Another rise in the National Association of Realtors’ Pending Home Sales Index for April confirmed that demand for housing remained high in the days leading up the expiration of the federal homebuyer tax credit.  The index in April reached its highest levels since October 2009 when the original federal homebuyer tax credit was set to expire.  While a fall in Purchase Mortgage Applications suggests some drop off in May, National Association of Realtors Chief Economist believes that the housing market has stabilized, stating it “appears to be in a good position to return to sustainable levels even without government stimulus, provided the economy continues to add jobs.”

We've just released the first quarter edition of our Market Snapshot reports.  Market Snapshots are concise 3-page reports with analysis written by one of our market experts, with a summary of market strengths and weaknesses, projections of the key economic and housing market statistics, top employers and stock performers, and much more.  The Market Snapshot is a fast and convenient way to get up to speed and what is going on in the local economy and housing market.