October sales reflect tax credit uncertainty

Portions of October's home sales numbers quickly illustrated the effect that the first-time homebuyer tax credit had on the market. As uncertainty lingered on whether the credit would be extended (and, for better or worse, now expanded), the impact was seen most significantly in new home construction. According to the National Association of Home Builders:

• Housing production fell 10.6% in October
• Single family starts declined 6.8% and multi-family dropped 34.6%
• New permits declined 4% to an annualized rate of 552,000 units. Near the multi-decade lows seen earlier this year.
  

New housing was the "canary in the mine" since builders were the first to tell customers they could not guarantee closing on a home by the original credit deadline. It's somewhat likely that the big drop off in construction was what prompted implementation of the expanded credit.

While new home construction was worrisome, existing home sales continued to show positive signs we've seen in the past few months. Key stats in the Cincinnati area include:

• Inventory to sales (or absorption rate) stayed steady at 7.5 months.
• Inventory continues to come down which could help stabilize prices. However, a point of concern continues to be the expected downstream foreclosure volume as delinquencies hit an all-time recorded high.
  
• Average sale prices, while still down at approx. $150,000, seemed to be flattening out from earlier declines

(click to see related charts)

Now that the credit has been expanded beyond just first-time buyers, there's some expectation that sales will stay relatively active through the winter and the "spring market" will arrive early next year - possibly as soon as January.