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Today the news is reporting Homes Sales are up in April. This is good news! However in order to properly evaluate this information you will need to know all of the details. Yes. Home sales have increased year over year from last April. However as compared to what? Last April was dismal according to historic standards. Yes. there have been more buyers entering the market. However how much of this was stimulated by Government Incentives - Tax Breaks and Discount Housing prices? Low Rates have also helped to stimulate this latest buying spree. Now the question is: With the Tax incentives and Government programs going away - Will the Buyers go away also? Has the Housing Market finally stabilized? It is too soon to tell. There are still more and more people going late on their Mortgage Payments. Right now it stands at about 10% of all homeowners are least 30 days late on their mortgage payment. In addition there are more and more defaults being filed every day. Many of these are what are know as "Strategic Defaults. Meaning the Homeowner has made a calculated decision to stop paying the Mortgage because the house value is " underwater " - approx 25% of all defaults are now Strategic - The homeowners are simply walking away - or not making payments because the likelihood of their home regaining value anytime soon is low. With all fo these late payments and strategic defaults there will be more foreclosures and more Bank Owned Properties. The Banks currently have so many defaults and homes they have taken back due to foreclosure that they do not release them into the Marketplace. This is called " Shadow:" inventory. If the Banks were to reveal all of their defaults and list all of their properties the fragile Real Estate Marketplace would implode. Causing further deterioration of home values. They hold these properties back and release them slowly in order to try and create a market fueled by supply and demand. In addition many times Banks are letting homeowners stay in their property in order to maintain the asset. Protect the house - cut the lawn - water the grass etc... If they kicked everyone out and listed every property the market would drop another 25% at least. Tax credit and low mortgage rates boost home salesHomebuyers rush to take advantage of tax credits and low mortgage rates in April WASHINGTON (AP) -- Homebuyers rushed to take advantage of government incentives and low mortgage rates in April, giving the housing market its biggest boost in five months. But now that a homebuyer tax credit has expired, growth in the second half of the year will depend on the lure of historically low mortgage rates and the strength of the economic recovery.Some economists say mortgage rates alone won't be enough to propel the market."Although mortgage rates have fallen sharply, the combination of high unemployment, heavy indebtedness and tight credit suggest to us that demand will stumble," said Paul Dales, an economist at Capital Economics.Sales of previously owned homes rose 7.6 percent to a seasonally adjusted annual rate of 5.77 million, the National Association of Realtors said Monday.The increase in sales sparked a rise in home prices. The median price for a new home rose to $173,100, up 4 percent from a year ago.Mortgage fell last week to the lowest level for the year and close to 50-year lows as worries over the European debt crisis sent investors rushing into the safety of U.S. credit markets.But Patrick Newport, an economist at IHS Global Insight, said the key to growth in the housing market won't be low mortgage rates."What really will drive sales forward and I mean after July, will be the job market," Newport said. "Having a good mortgage rate helps affordability, but we've had low mortgage rates for a long time now and sales have stayed below 5 million, except when the tax credit was involved."The tax credit's impact is expected to linger for a couple months. While homeowners had to have a signed sales contract by April 30, buyers have until the end of June to complete their sales. The federal government provided offered first-time buyers a tax credit of up to $8,000. Homeowners looking to upgrade were able to qualify for a credit of up to $6,500.Sales were up in all parts of the country except the West. The gains were led by a 21.1 percent jump in the Northeast and a 9.9 percent rise in the Midwest. Sales also rose 8.6 percent in the South.The only region of the country that saw sales decline was the West, where sales dropped by 6.2 percent from March.The big question facing the housing market is what happens now that the government's tax credits have expired.Even with the rise in sales, the inventory of unsold homes increased in April to 4.04 million units. That would represent 8.4 months of supply of homes at the April sales pace. While that is down from inventory levels of 11 months at the depths of the housing crash, it is still above more normal inventory levels of around six months supply.
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