The Federal Reserve, in its new 'Beige Book' report, says U.S. home sales are in the tank again with "evidence of very low or declining" interest from consumers in buying a house.
The central bank says the main culprit — as might be expected — is the expiration of the $8,000 first-time home buyer tax credit and a related credit for move-up buyers. (Mortgage rates are at a five-decade low.)
In short, the Fed confirms what mortgage bankers have known for several months: that although refis are strong, the purchase money market is extremely weak, accounting for just two of every 10 new mortgage applications.
"Some [Federal Reserve] Districts, such as New York and Dallas, noted that the expiration of the tax credit created especially weak conditions for lower-priced homes, while others, including Philadelphia and Kansas City, identified the high end of the market as the primary weak spot," the agency said in its new report.
The government reported that residential construction activity declined in most areas in response to weak home buying demand with Fed districts in Cleveland, St. Louis, and Minneapolis being the exceptions.
"Inventories of available homes rose in general, although the availability of new homes in Atlanta was held down by the slow pace of new home construction," the Fed said. "Price movements were mixed, with most Districts reporting stability or declines of late; a few, notably Boston, Minneapolis, and San Francisco, noted that prices rose in some areas compared with the previous reporting period or last year."
The Richmond district told the Fed that recent home sales were dominated by foreclosure and short sales. Chicago reported an increase in the supply of foreclosed homes for sale.
