Despite an uptick in the sales rate for August, home sales remain weak. The sales rate for existing homes bounced back slightly after taking a hit in July, but it remains well below the pace set by the homebuyers tax credit earlier this year. Existing homes sold at a 4,130,000 annual rate in August — 7.6 percent above the rate in July, but more than 20 percent below the average for the first half of the year. The purchase mortgage applications index remains depressed, running close to 30 months behind levels for the same months in 2009. This suggests sales in September and October are unlikely to pick up from their current rates.
All of this is consistent with the view that the main impact of the tax credits was to pull purchases forward. People who might have bought in the second half of 2010 or even 2011 instead bought their home before the tax credit expired. While the credits sustained an annual sales rate of well over 5 million for the period it was in effect, the sales pace is likely to remain close to 4 million for the rest of 2010 and 2011. The moving forward of purchases helped to support sales prices during this period, but did nothing to affect the underlying glut of housing.