If you pay them, they will come. And then flee as fast as they can.
That's the takeaway from this morning's existing home sales report, which shows nationwide sales in July plunging 27.2% to the lowest level since 1996, when the U.S. had roughly 37 million fewer residents than today.
The culprit for this cliff-drop is fairly obvious: the expiration of the first-time homebuyers credit, which paid people to buy homes since early 2008. The deadline for applying for this program was the end of April, but sales could be completed as late as June 30. The rush to get in while this credit could be had looks like it was epic. That's why July's sales were absolutely slaughtered.
What's this all mean? A couple of thoughts:
Don't view this number as any sort of normalcy that should be extrapolated into the future. This month's number is just as skewed lower by the housing credit as April's number was skewed higher. It's a near certainty that existing home sales will rise in the months ahead.
Finance blog Calculated Risk has a nice chart showing how wacky the past few months have been:
If you need proof that the homebuyers credit did nothing more than create obnoxious volatility, this chart is about as good as it gets. D.R. Horton's