Despite a recent surge in the real estate industry, experts predict that sales will plummet this summer. This is mainly due to the expiration of the tax credit, the ongoing unemployment crisis, and the strict lending standards. “Potential home buyers are a little rattled by the state of the economy and what has happened in housing over the past two to three years,” said Wells Fargo economist Tim Quinlan. Plus, mortgage delinquencies continue to worsen in Miami.
This downturn follows a series of months where construction rates actually climbed. Single-family home-building increased by 10 percent last month. Although the home building rate remains 70% below the decade’s peak in January 2006, this figure still represents more than 40% above the April 2009 bottom. Home construction in April was at its highest in 18 months. The Commerce Department stated that the rate of construction last month for single-family homes and apartment buildings rose 5.8% to a seasonally adjusted annual rate of 672,000. The builders’ boost is attributed to the two tax credits that were available to buyers early this year: an $8,000 credit for new buyers and a $6,500 for current owners who buy and move into another home. According to the IRS, about 2.2 million households used those credits at a cost of $16 billion through late March. There is no sign that Congress will extend the tax credits in the near future.
Notwithstanding, it is evident that the pace of construction has slowed down as the latest readings on applications for new building permits reveal that applications sank 11.5% in April to an annual rate of 606,000. That’s the lowest since October. Some hope that the tame interest rates at the record lows help bolster the economy once again.
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