February Existing Home Sales Rise While Home Prices Tank

As reported my CNNMoney.com - "Existing home sales spike 5%":

Sales of existing homes unexpectedly rose in February, recovering from a sharp drop in the previous month, according to an industry report released Monday.

The National Association of Realtors said that existing home sales rose last month to a seasonally adjusted annual rate of 4.72 million million units, up 5.1% from a rate of 4.49 million in January. February sales were down nearly 5% from year ago levels.

Who's buying?

The report said first-time buyers made up half of all purchases in February, and that sales of distressed properties accounted for about 45% of all transactions.

Where the sales were HOT?

Sales were unexpectedly strong in the West, with activity increasing more than 30% over last year.

Median home price drops:

The national median existing-home price was $165,400 in February, down 15.5% from last year, when the median price was $195,800.

Inventory levels:

Meanwhile, the total number of existing homes on the market at the end of February rose 5.2% to 3.80 million units. At the current sales pace, it would take an estimated 9.7 months to sell down that inventory of properties.

The report also said the total number of homes for sale has steadily declined over the past six months from a record level last July.

Falling home prices have been translating into increased sales activity and trending lower inventory levels. Couple that with 4-5% interest rates and home buyer credits .... bargains and good deals abound.

Existing Home Sales Plunge

From Bloomberg - "U.S. Existing Home Sales Fall 8.6% in November to 4.49 Mln Rate":

Sales of previously owned homes in the U.S. fell more than forecast in November and prices dropped by the most on record, indicating the real estate slump will extend into a fourth year and worsen the recession.

Purchases declined 8.6 percent to an annual rate of 4.49 million, from a 4.91 million rate in October that was less than previously estimated, the National Association of Realtors said today in Washington. The median price dropped 13.2 percent from a year earlier, the biggest decline since records started in 1968. Separately, the Commerce Department reported today that new-home sales fell 2.9 percent last month.

Making more of the wrong kind of history:

The median price of an existing home fell to $181,300, and the percentage drop from a year ago was “probably the largest price decline since the Great Depression,” although records don’t go back that far, said NAR Chief Economist Lawrence Yun.

Foreclosures and short sales accounted for 45 percent of last month’s home purchases, Yun said.

Resales of single-family homes fell 8 percent to an annual rate of 4.02 million. Sales of condos and co-ops declined 13 percent to a 470,000 rate.

What happened in your neck of the woods?

Purchases declined in all regions of the country, led by drops of 12 percent in the Northeast and 10.9 percent in the South. Sales fell 7.4 percent in the Midwest and 4.3 percent in the West. Prices also fell throughout the country, led by a decline of 25.5 percent in the West.

The Western region continues to fare better in recent existing home sales reports. It looks like the dramatic drop in prices in many of the Western markets (CA, AZ, NV) are pulling in a respectable number of buyers looking for and finding deals. During the earlier stages of the housing decline, the Southern region had been holding strong, now, they're feeling the strongest pain in reduced sales.

Do we really need to restate that Real Estate is local, Real Estate cycles, and money flows in and out of markets. If you can't sell your home in CA, how can you afford to move to North Carolina? Simply one basic example of cause and effect. One less home on the market in CA, one more home still on the market in North Carolina. Inventory, inventory, inventory.

October 2008 - Existing Home Sales Report Worse Than Expected

As reported by CNNMoney.com - "Existing home sales tumble:"

Sales of existing homes fell in October and prices continued to decline as potential buyers remain sidelined by the weak economy, according to a real estate group's report issued Monday.

The National Association of Realtors reported that sales by homeowners slid in October to an annual pace of 4.98 million. That was down 3.1% from September's revised reading of 5.14 million.

Economists surveyed by Briefing.com were expecting sales to have declined to an annual rate of 5.05 million in October.

On a year-over-year basis, sales were down 1.6%.

Housing supply increased slightly:

Total housing inventory at the end of October eased 0.9% to 4.23 million existing homes, according to the report. At the current sales pace, that represents a 10.2 months of supply, which was up from the 10-month supply in September.

The West bucks the trend with strong sales numbers:

Sales declined nationwide on a monthly basis. But sales in the West rose 37.5% over year-ago levels, suggesting that some buyers are taking advantage of distressed sales in overbuilt areas in California and Nevada. - CNNMoney.com

The U.S. housing market remains on an extremely shaky foundation. It does continue to appear that extreme pricing pressures have pushed home prices low enough to entice a fair number of investors and home buyers as indicated by the strong numbers posted in the West.

Over the past few months, there have been and continue to be intermittent bright spots and hints at positively trending indicators but, every step of the way, the depression like economic conditions that we continue to face continue to hold back housing.

Sadly, times remain very grim and look to continue, in the near term, on the same wayward path as housing fights for equilibrium.

Existing Home Sales Report: September 2008

As reported by CNNMoney.com: Existing home sales jump, prices sink.

"Sales of existing homes rose in September, according to the latest reading on the battered housing market by an industry trade group released Friday.

The National Association of Realtors reported that sales by homeowners jumped 5% in September to an annual pace of 5.18 million, up from the August reading of 4.91 million.

September sales were up 1.4% from a year earlier. Economists surveyed by Briefing.com expected the report to show existing home sales rose to an annual pace of 4.95 million.

But prices still continued to fall. The median price of all homes sold during the month fell to $191,600, down 9% from $210,500 a year ago. Before the start of the current housing slump, it had been 11 years since prices fell compared to a year earlier."

More existing home sales analysis as reported by Bloomberg: - U.S. Economy: Home Resales Rose More Than Forecast in September

"Economists said sales figures for this month and next will be critical in determining whether sales have reached a bottom as predicted by the Realtors' group. Federal Reserve Chairman Ben S. Bernanke earlier this month said even households with 'good credit' were finding it tough to get mortgages.

'This may be a temporary bump as we clear out these foreclosed properties,' said Adam York, an economist at Wachovia Corp. in Charlotte, North Carolina. 'As the meltdown really hits these figures in late October and November, that's when we could see some retracement.'

Resales were forecast to rise to a 4.95 million annual rate from a 4.91 million pace in August, according to the median estimate of 66 economists in a Bloomberg News survey. Projections ranged from 4.7 million to 5.11 million."

Foreclosure type and "Distressed Sales" comprised a large percentage of the sales:

"Foreclosure-related sales accounted for 35 percent to 40 percent of last month's total, the agents' group said. Of those, about 80 percent were for primary residence, higher than the average of about 75 percent and signaling that investors are not a primary reason for the jump, said Lawrence Yun, the group's chief economist.

'In terms of sales, I think we have bottomed out,' Yun said in a press conference. 'The first step to housing-market stabilization is rising home sales. Hopefully, this trend can continue.'

The number of previously owned unsold homes on the market at the end of September represented 9.9 months' worth at the current sales pace, the fewest since February and down from 10.6 months' at the end of the prior month.

Inventories need to continue dropping in order to stabilize prices, and that will take more time, Yun also said. In the past, the Realtors' group has said a five to six month's supply represents a stable market."

Housing prices continue to fall:

"The median price of an existing home dropped from a year ago to $191,600, the lowest since April 2004. Falling home prices make it harder to refinance mortgages, pushing up foreclosures in the third quarter to the highest since record-keeping began in 2005, according to Realtytrac.com.

Resales account for about 90 percent of the market, while purchases of new homes make up the rest. Sales of existing homes are compiled from contract closings and may reflect contracts signed one or two months earlier.

Today's report showed resales of single-family homes climbed 6.2 percent to an annual rate of 4.62 million. Sales of condos and co-ops were unchanged at a 560,000 rate.

Purchases increased in three of four regions, led by a 17 percent surge in the West as distressed sales jumped in California and Nevada. In the Northeast, sales fell 1.2 percent."

Housing market still searching for the bottom:

"'The housing downswing is really not exactly even nearing a bottom at this point,' David Seiders, chief economist at the National Association of Homebuilders said Oct. 17 in an interview with Bloomberg Television. 'The core problem in the economy is still housing, and house prices are decimating the financial markets.'

Construction companies continue to struggle. Pulte Homes Inc., the third-largest U.S. builder, this week reported a net loss of $280.4 million for the third quarter, more than double what analysts had projected.

'A bottom in the housing market may not come for some time,' Chief Executive Officer Richard Dugas said on a conference call yesterday."

It may have been lost in this latest release of the existing home sales numbers but, we believe it is important to note that inventory numbers have been subsiding quietly over the past year and now the trend suggests that perhaps inventory numbers are beginning to level:

Inventory levels were flat for years (during the bubble), but started increasing at the end of 2005.

Inventory levels increased sharply in 2006 and 2007, but have only increased slightly in 2008. In fact inventory for August and September 2008 are slightly below the levels of last year. This might indicate that inventory levels are close to the peak for this cycle (and have peaked for 2008), however there is probably a substantial shadow inventory - homeowners wanting to sell, but waiting for a better market - so existing home inventory levels will probably stay elevated for some time. - (CalculatedRISK)

Again, simple supply and demand. As goes the inventory so does ultimately the pricing. Too much inventory spells disaster for housing prices. Tight supplies ultimately creates upward pressures on pricing. Many economist believe that housing needs to find a solid footing before the rest of this economic mess can be effectively cleaned up. We're not economists but we do agree.