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Tight supply draws mixed numbers in residential real estate sales

As each month passes, economic observers look to various public and private agencies to release monthly data, which often indicates where the national economy is moving. A recent report released by the National Association of Realtors shows that residential real estate purchase transactions fell during the month of May.

According to the housing data, sales of pre-owned homes dropped by 1.5 percent during May, even though many predicted a stronger month. Though these numbers may have disappointed some, others indicate that the statistics alone don't tell the whole story.

One of the reasons that sales fell is that the housing market is very tight right now, as many homeowners are making the choice not to put their homes up for sale. In other words, the problem is a relatively low supply of houses, rather than low demand.

Observers indicate that many homeowners who have underwater mortgages feel as though home prices will rise, so they want to recover as much of their home value as possible when they decide to sell. This is demonstrated by the fact that the number of distressed-property transactions and short sales dropped, when compared to this time last year.

On the other hand, the long-term housing market still appears to be improving in comparison to last year. A total of 4.6 million homes will sell over the course of the year based on current numbers, which is higher than the annualized rate for May 2011. Additionally, the median home price has also risen, which is also positive for distressed homeowners.

Regardless of how the housing market is expected to perform for the rest of the year, interested buyers and sellers still face challenges. Prospective buyers may not be able to get a favorable line of credit, since banks are hesitant to lend, and sellers may be dealing with negative home equity. Fortunately, there are options available for both parties, as trustworthy counsel can help navigate the difficulties associated with selling a home in times of distress.

Source: WIS-TV News, "Why did home sales cool during key spring season?" Mark Trumbull, June 22, 2012

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