Thursday, November 12, 2009

Home sales in surprise drop

Home sales have dropped for the first time after rising for 5 straight months.


Well, I must say I have long anticipated this ramification. Then again, it has come at the right time, just 1 month before the tax credit is going to end. While it might be true that the tax credit is most likely to be extended, people can't help but play it safe by curbing their spendings right now.


Paradoxically, I do not believe the main reason behind the drop in sales is due to the potential withdrawal of the tax credit.




Firstly, if it is mainly due to that reason, shouldn't people be buying until the last day? We are all notoriously famous for clinching last minute deals because we know that we will be in for some great bargains at the end of the day so everyone have a propensity to stick around until the end before they disperse.


Secondly, everyone is optimistic about the extension of the tax credit and are de facto confident about it. Here comes the exciting part because in my opinion, I believe that it is the potential extension of the tax credit that is causing the withdrawal symptoms right now.




Why? Very simple, the reason being is that because of the rising ambiguity in this case, people want to wait and see what happens, particularly in this crucial period where the government is still ruminating on whether to extend the credit.

Since there is a high chance that the government is going to extend the period, why not we wait and see if they might add in a few surprises, for example, more tax credit, more benefits, guranteed interest free or even free gifts?

Even if there is nothing at the end of the day and in the worst case scenario where the government decides to obliterate the cash-for-clunkers program, the public can still rush to buy at the last minute since this enticing promotion ends late November.


Hence, I believe that the reason for the decline in sales is because of the fact that people think that they can afford to wait since there's no hurry right now. And truely enough, they have nothing to lose by waiting right now!

Credit -whdh

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