Home Sales Drop in December.

Yesterday it was reported that home sales dropped in December. Nothing earth shaking here, or is it? Let's look at the real trend and numbers happening here.

December home sales dropped by over 17% from November, in what is the largest monthly drop in home sales in over 40 years. The press and trade folks are claiming that this is a direct result of home buyers believing that this drop was due to buyers believing the one time tax credit was going to expire at the end of November. (It is now extended to April 30th, 2010)

I think that there may be some truth to this but let's look at all the issues. Winter is traditionally the slowest time for real estate sales, so this should come as no surprise. The December unemployment figures were higher than expected, and the consumer confidence issue continues to deteriorate. Add this to banks not lending, Wall Street quick rise up and lackluster predictions across the board for 2010's general economy and this drop should come as no supply.

The FHA is now tightening it's lending rules as we move forward into the new year and folks I gotta tell you I have this gnawing feeling we are headed for real trouble in real estate. In some markets FHA loans amount to over 60% of all sales. Typically FHA requires only a 3.5% down payment whereas convention loans require 20% down payments.

With the jobless recovery becoming some sort of a real scenario, the rapidly declining consumer confidence, the housing market sales declines and the end of any stimulus results coming soon, makes me really nervous. Let's hope I am wrong but I think we could get to a point here real soon where we won't have buyers for the all the homes coming into this market. That spells real trouble for all those except the few who have jobs, down payment money and desire to own!