Honestly, it seems hard to write that anyone should be "surprised" there was a drop in sales. Remember, the government-subsidized home-buyer credit, which already had been extended, expired at the end of April. The real estate market has been artificially supported by the federal government for nearly a year now and, with unemployment still near 10 percent, it should be no surprise that when the government subsidy leaves the home-buyer market, so do the buyers. Economists expected the subsidies to have a longer tail than they did.
This is like cash-for-clunkers, but with houses instead of cars. These sort of government subsidies do little than pull future sales forward. As such, we haven't been able to get a real read on the housing market without artificial supports. Some more grave forecasters say residential real estate could fall into a double-dip without the supports.
All this being said, sales of existing homes in May 2010 were up 19.2 percent compared with May 2009, which is a terrific number, but remember, May 2009 was a terrible month for home sales.
The median sales price of an existing home was up 2.7 percent compared with May 2009, coming in at $179,600.
There's an 8.3-month supply of unsold homes, or what real estate folk call "inventory." A healthy real estate market maintains an inventory of about six months.
Glenn Kelman, president and CEO of the Redfin real estate brokerage company, said of the tax credit's expiration: "We have seen every market immediately feel the effects."
California is in "the final frenzy of its tax credit," which offered $10,000 to first-time buyers, Kelman said,according to my colleague Elizabeth Razzi, our real estate editor, who interviewed him.
Kelman said the tax credit borrowed buyers from the summer, and possibly into the rest of the year. "I think it's going to be a slow fall," he said.