""Mortgage insurer PMI"":http://www.pmi-us.com has cut its growth projections for 2010 home sales by more than half. The company's analysts now expect sales of existing homes to rise a modest[IMAGE]
2.9 percent for the year to 5.31 million units. That's a sharp downgrade from a mere month ago, when they were predicting we'd see a 6.1 percent annual gain.
The forecast for new home sales, too, has been slashed. Last month, PMI was forecasting a 19.9 percent jump for the year. But now, they've dropped it to 9.4 percent, representing total annual sales of 409,000 units for new homes.
PMI says the falloff in sales numbers now that the tax credit is gone suggests homebuying activity has already reached its high-water mark for the year. Even record low mortgage rates and attractive pricing Ã¢â‚¬" both factors that should entice buyers to come off the sidelines Ã¢â‚¬" aren't doing enough to elevate demand in today's market.[COLUMN_BREAK]
The mortgage insurer said in its ""July Housing and Mortgage Market Review"":http://viewer.zmags.com/publication/0ff8fbe9#/0ff8fbe9/2, ""The expiration of the second tax credit has hit housing activity hard, after having drawn sales forward into March and April. Moreover, all of the near-term leading indicators of housing activity suggest no pickup in coming months (and perhaps even additional declines).""
Directionally, PMI says, ""this should not have been a surprise to anyone Ã¢â‚¬" although the magnitude of the falloff is larger than we expected.""
The company remains hopeful that home sales will rebound some in the second half of the year, but it doesn't see a faster sales pace until 2011. As long as the economy continues to strengthen and the demographics for household formation improve, PMI says existing home sales should rise 8.6 percent next year to 5.76 million units, and new home sales should soar 48.7 percent to 608,000 units.
The mortgage insurer notes in its report that home prices have edged upward recently, but it expects the drop-off in sales may reverse this trend temporarily.
""We continue to expect little change in house prices over the course of 2010, before climbing modestly by nearly 2.0 percent next year,"" PMI said.
The company's analysts also predict that mortgage rates will remain below 5.00 percent until late this year. With rates the lowest they've been in about 55 years, refinance applications are showing a marked increase. PMI says refi volumes are likely to continue to rise and should help to offset declines in purchase activity.