Existing Home Sales Dip 3.5 Percent
According to data released Thursday by the National Association of Realtors, existing home sales fell 3.5 percent in the US in July, disappointing analysts who had projected an increase of about 2.5 percent. According to housing market insiders, the forecast of an increase in sales was based on recent reports showing rising pending home sales, but an increase in the amount of cancellations prevented many of those pending home sales to make it to closing.
The upswing in cancellations has been caused by a variety of factors. Banks are requiring higher credit scores and down payments, leading to many buyers not being able to acquire financing to buy homes. Low appraisals are having an impact, as well, as buyers are backing out when a home receives an appraisal that values a home at a lower price than what they had agreed to pay. Also, higher-end markets are being impacted by a recent reduction the cap for loans guaranteed by the Federal Housing Administration. The agency recently reduced the maximum amount on its loans from $729,000 to $625,000, impacting sales in higher-priced markets such as California.
But the single most important factor in declining home sales is confidence. Recent volatility in the stock markets, the ongoing debt crisis in Europe, and overall weakness in the global economy simply have many Americans in a place where they are unwilling of taking on the huge investment of buying a home. To make matters worse, talk among economists of a double-dip recession is gaining steam, meaning that conditions will not likely improve any time soon.
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