After sales of existing homes had exploded in November to the highest level in almost three years, they appear to have dropped off rapidly in December. November’s surge likely reflects how dependent the market has become on government sponsored tax credits and below normal interest rates. The National Association of Realtors (NAR) announced that its index of sales agreements dropped 16% from October to November, reflecting the first drop following nine consecutive months of gains and resulting in the lowest reading since June. This decline was far greater than the forecasted drop of just 2%. Normally a two month lapse between purchase contract and closing day is typical and with the announcement that the Home Buyer Tax Credit Program was both extended through April 30, 2010 and expanded to include existing homeowners as well, coming off the holidays it will likely be spring-time before any notable gains in sales activity will be reflected as a result of the tax credit extension. And just as government purchase incentive programs before it have shown, these sales are being brought forward at the expense of future activity.
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