By Mark Huffman
ConsumerAffairs.com
October 23, 2009
On the surface, the numbers are eye-popping. Sales of existing homes surged 9.4 percent in September over August, according to the National Association of Realtors. True, it's a huge month but no one is declaring a housing recovery.
"Much of the momentum is from people responding to the first-time buyer tax credit, which is freeing many sellers to make a trade and buy another home," said Lawrence Yun, NAR's chief economist. "We are hopeful the tax credit will be extended and possibly expanded to more buyers, at least through the middle of next year, because the rising sales momentum needs to continue for a few additional quarters until we reach a point of a self-sustaining recovery.
An extension of the housing tax credit may be key to driving future sales. It expires at the end of November, meaning September's robust numbers may be explained by first time buyers trying to get in under the wire.
A closer look at the numbers reveal that many of September's closings were desperation sales and foreclosures. Most of the sales came in under $200,000. There was very little activity north of that number.
Early information from a large annual consumer study to be released November 13, the 2009 National Association of Realtors Profile of Home Buyers and Sellers, shows that first-time home buyers accounted for more than 45 percent of home sales during the past year. A separate practitioner survey shows that distressed homes accounted for 29 percent of transactions in September.
Still time to buy
That suggests that consumers who have been shut out of the housing market over the last few years still have time to get in, assuming they can find financing. Foreclosures continue and prices do not appear to be rising in most areas of the country.
On the other hand, homeowners who would like to sell will probably have to wait a while longer. Still, the Realtors remain optimistic.
"We're getting early indications of price stabilization, but we need a steady supply of qualified buyers to meaningfully bring inventories down and return us to a period of normal, steady price growth and to fully remove consumer fears, which would then revive the broader economy," Yun said. "Without a firm foundation for middle-class wealth recovery, the post-recession economic growth likely will be one of the weakest in U.S. history."
Inventory shrinks
Among the good news in the September report is the fact that total housing inventory at the end of September fell 7.5 percent to 3.63 million existing homes available for sale, which represents an 7.8-month supply2 at the current sales pace, down from an 9.3-month supply in August. Unsold inventory totals are 15.0 percent below a year ago.
"The current housing supply is the lowest we've seen in two and a half years," Yun said. "If we could continue to absorb inventory at this pace, home prices would return to normal, modest appreciation patterns next year.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 5.06 percent in September from 5.19 percent in August; the rate was 6.04 percent in September 2008.Prices Fall Again
The national median existing-home price3 for all housing types was $174,900 in September, which is 8.5 percent lower than September 2008. Distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes in the same area.
Single-family home sales rose 9.4 percent to a seasonally adjusted annual rate of 4.89 million in September from a pace of 4.47 million in August, and are 7.7 percent above the 4.54 million-unit level in September 2008. The median existing single-family home price was $174,900 in September, which is 8.1 percent below a year ago.
Existing condominium and co-op sales jumped 9.7 percent to a seasonally adjusted annual rate of 680,000 units in September from 620,000 in August, and are 9.7 percent above the 561,000-unit pace a year ago. The median existing condo price4 was $175,100 in September, down 11.7 percent from September 2008.
Regionally, existing-home sales in the Northeast increased 4.4 percent to an annual level of 950,000 in September, and are 11.8 percent higher than September 2008. The median price in the Northeast was $234,700, down 7.0 percent from a year ago.
Existing-home sales in the Midwest jumped 9.6 percent in September to a pace of 1.25 million and are 7.8 percent above a year ago. The median price in the Midwest was $147,600, which is 1.0 percent below September 2008.
In the South, existing-home sales rose 9.0 percent to an annual level of 2.06 million in September and are 10.8 percent higher than September 2008. The median price in the South was $153,500, down 7.6 percent from a year ago.
Existing-home sales in the West surged 13.0 percent to an annual rate of 1.30 million in September and are 5.7 percent above a year ago. The median price in the West was $219,000, which is 15.0 percent below September 2008.
