By Mark Huffman
ConsumerAffairs.Com
September 24, 2010
Home sales rose in August, but analysts say it's not as promising
as you think. It followed a major correction in July.
According to the National Association of Realtors monthly report, existing homes sales in August rose 7.6 percent to a seasonally adjusted annual rate of 4.13 million in August from an upwardly revised 3.84 million in July.
But to put the market in perspective, August sales were still 19.0 percent below the 5.10 million-unit pace in August 2009.
The housing market is trying to recover on its own power without the home buyer tax credit, said Lawrence Yun, NAR's chief economist. Despite very attractive affordability conditions, a housing market recovery will likely be slow and gradual because of lingering economic uncertainty.
Housing is not going to lead the way out of the slow growth economy as it has in previous recoveries said Joel Naroff, chief economist for Naroff Economic Advisors, of Holland, Pa. Credit standards, equity losses and uncertain households should hold back demand for a while. But this is a process and maybe we are starting to find out what the true state of home sales will be now that the government?s interference with the markets is working its way out.
Rock bottom rates
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.43 percent in August from 4.56 percent in July; the rate was 5.19 percent in August 2009.
Home values have shown stabilizing trends over the past year, even as the economy shed millions of jobs, because of the home buyer tax credit stimulus, Yun said. Now that the economy is adding some jobs, the housing market needs to steadily improve and eventually stand on its own.
The national median existing-home price2 for all housing types was $178,600 in August, up 0.8 percent from a year ago. Distressed homes3rose to 34 percent of sales in August from 32 percent in July; they were 31 percent in August 2009.
Total housing inventory at the end of August slipped 0.6 percent to 3.98 million existing homes available for sale, which represents an 11.6-month supply4 at the current sales pace, down from a 12.5-month supply in July.
Fewer first time buyers
A parallel NAR practitioner survey shows first-time buyers purchased 31 percent of homes in August, down from 38 percent in July. Investors rose to a 21 percent market share in August from 19 percent in July; the balance of purchases were by repeat buyers. All-cash sales slipped to 28 percent in August from 30 percent in July.
Single-family home sales rose 7.4 percent to a seasonally adjusted annual rate of 3.62 million in August from a level of 3.37 million in July, but are 19.2 percent lower than the 4.48 million level in August 2009. The median existing single-family home price was $179,300 in August, up 1.2 percent from a year ago.
Single-family median existing-home prices were higher in 10 out of 19 metropolitan statistical areas reported in August from a year ago (the price in one of 20 tracked markets was not available). Existing single-family home sales were down in all 20 metro areas from August 2009.
Existing condominium and co-op sales increased 8.5 percent to a seasonally adjusted annual rate of 510,000 in August from 470,000 in July, but are 17.1 percent below the 615,000-unit pace in August 2009. The median existing condo price5 was $174,000 in August, which is 2.8 percent below a year ago.
Regional breakdown
Regionally, existing-home sales in the Northeast rose 7.9 percent to an annual level of 680,000 in August but are 24.4 percent below August 2009. The median price in the Northeast was $260,300, up 7.6 percent from a year ago.
Existing-home sales in the Midwest increased 5.0 percent in August to a pace of 840,000 but are 26.3 percent below a year ago. The median price in the Midwest was $149,600, up 0.4 percent from August 2009. In the South, existing-home sales rose 5.2 percent to an annual level of 1.62 million in August but are 13.4 percent below August 2009. The median price in the South was $155,000, down 1.5 percent from a year ago.
Existing-home sales in the West jumped 13.8 percent to an annual pace of 990,000 in August but are 16.1 percent lower than August 2009. The median price in the West was $214,700, which is 2.5 percent below a year ago.
