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Tax credit ate 2011 home sales

By Marcie Geffner ·
Monday, May 9, 2011
Posted: 11 am ET

What's going on with home sales?

It's a question that concerns homebuyers, home sellers, homeowners and renters who've contemplated trading their rent check for a mortgage payment.

At the moment, it's not an easy question to answer with the usual comparative data.

Resales of existing homes were up 3.7 percent to a seasonally adjusted and annualized rate of 5.1 million houses and condominiums in March compared with 4.9 million in February. But sales were down 6.3 percent in March 2011 compared with the 5.4 million rate of sales in March 2010. Those numbers are according to the National Association of Realtors, or NAR.

Pending home sales showed a similar trend: up from February to March, but down from last March to this, according to NAR's data.

Of course, real estate is famously localized and national trends don't reflect conditions on the ground in all states, cities or neighborhoods.

The problem with this data is that these year-to-year comparisons are distorted by the effect of last year's federal homebuyer tax credit. The various incarnations of the credit, worth up to $8,000, undoubtedly stimulated demand for housing in 2010. The question, anticipated then and all the more relevant now, is the extent to which that artificially pumped-up demand cannibalized home sales that otherwise would have occurred this year.

Indeed, the Realtors group mentioned in its statement that "sales were at elevated levels from March through June of 2010 in response to the home buyer tax credit."

The national housing market still appears weak, judging by the inventory of for-sale homes, which stood at 3.55 million, or an 8.4-month supply at the current pace of sales, at the end of March.

Home sales at an annualized pace of fewer than 5 million units is a weak housing market by just about any standard, though we might not be able to tell exactly what's going on until later this year when the year-to-year comparisons won't be distorted by government stimulus.

Bottom line: The U.S. is still, by and large, a buyer's market for residential real estate.

Follow me on Twitter: @marciegeff

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