RealEstateEconomyWatch.com Insight and Intelligence on Residential Real Estate
(September 24, 2009 Release)
Highlights
• Existing home sales fell 2.7 percent to an annualized pace of 5.10 million in August. The annualized home sales in August is now 3.5 percent above its pace from a year ago.
• August’s sales pace is equal to 3 month average of 5.10 million units.
• The Midwest, South, and Northeast experienced decreases of 6.7 percent, 3.1 percent and 2.2 percent, respectively, while the West experienced an increase of 2.7 percent.
• It was reported that 31 percent of home sales were foreclosure and short sales in August, no change from July.
• The median home price declined 12.5 percent from a year ago.
• The months’ supply of homes available for sale dropped to 8.5 compared to 9.3 in July.
| Existing Home Sales (Mil, SAAR) | ||||
| Aug 09 | July 09 | 3 mo Avg | 1 year ago | |
| United States | 5.10 | 5.24 | 5.1 | 4.93 |
| % change | -2.7 | 7.2 | 3.5 | |
| Northeast | 0.91 | 0.93 | 0.89 | 0.86 |
| % change | -2.2 | 13.4 | 5.8 | |
| Midwest | 1.14 | 1.22 | 1.15 | 1.14 |
| % change | -6.7 | 10.9 | 0.0 | |
| South | 1.89 | 1.95 | 1.89 | 1.86 |
| % change | -3.1 | 7.1 | 1.6 | |
| West | 1.16 | 1.13 | 1.15 | 1.08 |
| % change | 2.7 | -1.7 | 7.4 | |
| Months’ Supply | 8.5 | 9.3 | 9.1 | 10.6 |
| Median Existing Home Prices (Ths, NSA) | ||||
| Aug 09 | July 09 | 3 mo Avg | 1 year ago | |
| United States | 177.7 | 181.5 | 180.4 | 203.2 |
| % change | -2.1 | 0.3 | -12.5 | |
| Northeast | 241.1 | 251.5 | 246.9 | 269.5 |
| % change | -4.1 | 1.3 | -10.5 | |
| Midwest | 149.9 | 155.9 | 153.9 | 167.3 |
| % change | -3.9 | -0.1 | -10.4 | |
| South | 157.4 | 162.1 | 160.9 | 176.9 |
| % change | -2.9 | -0.7 | -11.0 | |
| West | 220.5 | 217.9 | 219.3 | 251.2 |
| % change | 1.2 | -0.8 | -12.2 | |
Source: National Association of Realtors
Analysis
Existing home sales fell 2.7 percent to an annualized pace of 5.10 million units after increasing for four consecutive months. However, August sales was the second strongest sales month in over a year. The 5.10 annualized pace of sales is equal to its 3 month average, suggesting that existing home sales has stabilized a bit. The drop in existing sales was disappointing and unexpected news to the nation’s housing sector. Most housing economists were expecting a rise in August sales.
Foreclosure sales made up 31 percent of total existing home sales for August which was no change from July so that foreclosure sales does not explain the drop in August home sales. The retreat in sales was broad-based as three out of the four major regions of the nation experienced a drop in sales.
On the supply side, the months’ supply in August dropped sharply to 8.5 compared to 9.3 in July. Most of this drop can be attributed to a sharp drop in home listings for the month which is typical for August based on the past several years.
Despite the drop in existing home sales, it is likely that we have seen the worst in the housing marketplace. It appears that the housing correction, with regard to home sales, is now underway. There are some positive influences for the housing sector. Mortgage rates are hovering near historic lows and are expected to remain at these levels for the remainder of the year. The economy is beginning to show signs of rebounding and affordability measures are near record highs.
However, on the down side, the economy continues to shed jobs, mortgage credit conditions also remain relatively tight, keeping households who want to purchase homes out of the purchase marketplace. And home values continue to fall as evidenced by the 12.5 percent drop in the median home price, year over year. Further, there are two recent developments that do not bode well for future housing activity. First, the $8,000 tax credit is expiring at the end of November. If the government does not extend this tax credit, first time home buying demand could drop-0ff considerably. Second, the market is expecting a meaningful rise in foreclosure filings in 2010 due to rate resets on option ARMs and interest only mortgage loans. More foreclosures could put a temporary floor on inventories, exerting downward pressure on home prices. On balance, it will take time for the housing sector to fully recover (i.e., a recovery in both home sales and home prices).
