Activity Drops as Tax Credit Expires – Says Credit Suisse Survey

I just received this report below from Credit Suisse. They do a monthly survey. May saw buyer traffic decline, home prices decline and incentives at new home subdivisions decline. Please enjoy the article below.

Phoenix, AZ – Buyer Urgency Diminishes; Agents Hope Low Rates and Prices Will Be Enough (8,657 single-family permits in 2009, 4th largest market in the country) Buyers pull back after tax credit. Buyer traffic declined in May and fell short of expectations, as our traffic index declined to 37 from 51 in April (a reading below 50 indicates traffic below expectations). Negative commentary from agents centered on the April 30th tax credit expiration, after which traffic into sales offices slowed markedly. One agent said, “It’s grim. There are no buyers and the offices are empty.” Another commented, “There was a huge push until April 30th; now buyers are in no big hurry.” Others agreed, calling it, “a bit of a breather.” However, some agents still sounded upbeat about prospects based on the continued low (and potentially lower) home prices and attractive mortgage rates. According to one agent, “The tax credit is gone, but the housing prices are still low and the trend of mortgage rates is rising, so many buyers and investors are still buying even without tax credit incentive.” Several others also noted a continued interest in foreclosures and short sales, which are becoming even more prevalent. We think demand will likely remain subdued at least through next month.

Prices decline as buyers disappear. Home prices fell further in May, as our price index slipped to 39 from 41 in April, with readings below 50 indicating sequentially lower prices. Agents noted lower prices due to the drop in demand and as inventory increased again. Our home listings index fell to 36 in May from 40 in April, below a neutral reading of 50 (any reading below 50 indicates higher inventory levels). This remains a concern as an increasing number of foreclosures and short sales are likely to come back on the market this summer.
Comments from real estate agents:
■ “The ending of the tax credit really put the brakes on activity.”
■ “Extremely low interest rates and depressed prices are helping.”