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Existing home sales increase in January; fueled by falling home prices

Dennis NormanToday’s existing home sales report from the National Association of REALTORS® shows existing home sales in January were at at a seasonally adjusted-annual rate of 5.36 million units which is an increase of 2.7 percent from December and is an increase of 5.3 percent from a year ago.

Home prices decrease for the seventh-consecutive month….

The median home price in the U.S. in January was $158,800, a decrease of 5.9 percent from December’s revised median price of $168,800 and a decrease of 3.7 percent from a year ago when the median price was $164,900.

Number of homes for sale decrease for the fifth-consecutive month….

The number of existing homes on the market decreased in January by 5.1 percent to 3.38 million homes, but is still up 3.1 percent from a year ago when there were 3.277 million homes for sale. Based upon the current rate of sales the supply that this inventory translates into dropped by 7.3 percent to 7.6 months from 8.2 months in December and is 1.3 percent lower than a year ago when the supply was 7.7 months.

Metro Home Sales and Prices –

NAR publishes existing home sales for major metropolitan areas of the U.S. Highlights from that report for December include:

  • Twelve metro areas saw an increase in sales from a year ago with Miami-Ft. Lauderdale leading the way with a 32.9 percent increase in sales.
    • Baltimore, MD had the second largest year-over-year sales increase at 27.0 percent, closely followed by New Orleans, LA at 23.2.
  • Dallas-Fort Worth, TX had the largest decrease in sales from a year ago with a 7.7 percent decrease.
    • Atlanta, GA had the second highest decrease in sales from a year ago with a 6.3 percent decrease, closely followed by Washington D.C. with a 5.5 percent decrease.
  • Twelve of the metros also saw year-over-year declines in home prices in January.
    • Dallas-Fort Worth, TX saw the largest one-year increase in home prices this month with a 7.5 percent increase, followed by Indianapolis, IN at 7.0 percent and my hometown, St. Louis at 5.3 percent.
    • Miami-Ft Lauderdale, FL saw the biggest one-year decrease in home prices with a decline of 18.3 percent, followed by Minneapolis-St. Paul with a 10.8 percent decline and Portlan, OR with a 10.3 percent decline.

Lawrence Yun, NAR chief economist, said “the improvement is good but could be better. The uptrend in home sales is consistent with improvements in the economy and jobs, which are helping boost consumer confidence,” Yun said. “The extremely favorable housing affordability conditions are a big factor, but buyers have been constrained by unnecessarily tight credit. As a result, there are abnormally high levels of all-cash purchases, along with rising investor activity.”

I don’t like “seasonally adjusted rates of sales”:

If you have been reading my posts for a while you know by now I don’t like “seasonally adjusted” numbers when artificial stimuli, such as tax-credits, can cause an unseasonal spike in sales activity. I much prefer to see the actual numbers and try to garner from them what is going on in the housing market.

The following are the ACTUAL Existing Home sales reported by NAR without any adjustment or fluff:

  • There were 284,000 existing homes sold in January which is a decrease of 29.7 percent from December and a 3.3 percent increase from a year ago.
  • Below are highlights from each region for January:
    • Northeast – 41,000 homes sold, a decrease of 34.9 percent from the prior month and the same as the year before.
    • Midwest – 56,000 homes sold, a decrease of 33.3 percent from the prior month and an increase of 3.7 percent from the year before.
    • South – 109,000 homes sold, a decrease of 30.1 percent from the prior month and an increase of 4.8 percent from the year before.
    • West – 78,000 homes sold, a decrease of 22.8 percent from the prior month and an increase of 2.6 percent from the year before.

Other highlights of the NAR Report:

  • Distressed sales accounted for 37 percent of all home sales in January, up from 36 percent the month before.
  • First-Time homebuyers accounted for 29percent of the home sales in January, down from 33 percent the month before.
  • Investors were the buyers of 23 percent of the homes in January, up from from 20 percent the month before.
  • Repeat home buyers were responsible for approximately 48 percent of January’s sales, up slightly from 47 percent the month before.

My Take On the Numbers:

For the past couple of months I’ve been saying I thought the market had found the “bottom” and that we are moving toward a sluggish recovery, with price degradation continuing. This report supports my earlier thoughts and while it may be a “rocky” bottom, we seem to be bouncing along the bottom. Home prices are clearly fueling sales….this supported by the fact of the greatly increased investor activity in the market versus what we would see in a normal market. For this reason, I think if, by the time the large pipeline of foreclsures has made it through the system and through the market, the economy has not strengthened we will see a stabilization in home prices due to the lessened impact by distressed sales but we will also see a decline in sales activity.

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