Home Sales Up, But Tax Credit And Jobs Threaten

Pending home sales rose again in April. But, the trend likely reversed itself in May. The housing market improvement may simply be a mirage.

The National Association of Realtors reported:

The Pending Home Sales Index,* a forward-looking indicator, rose 6.0 percent to 110.9 based on contracts signed in April, from an upwardly revised 104.6 in March, and is 22.4 percent higher than April 2009 when it was 90.6. That follows gains of 7.1 percent in March and 8.3 percent in February.

The figure is at its highest level since last October.

The association sees a continued improvement this year and next, but the forecast is probably based on false premises.

The first of these is that home prices are stabilizing, a sign of improved demand. But that could be entirely due to tax credits for first time buyers.

The second supposition is that NAR expects a net of 1 million additional jobs in the second half of this year and about 2 million in 2011.

There is enough risk in the economy, primarily because of the financial trouble among the EU nations, to cause a faltering of exports, which would cause unemployment to stay high and may even cause a double dip recession.

Douglas A. McIntyre