Posted on Wednesday, October 27, 2010
Sales of previously owned homes rose in September for the second straight month. Data released by the National Association of Realtors (NAR) Monday revealed a 10 percent jump in existing-home sales last month.
The month-to-month gain was more than analysts were expecting, and NAR declared in a statement to the press that the latest numbers “affirm a sales recovery has begun.” Some market observers, though, suggest such an assertion is premature.
Paul Dales, U.S. economist for the research firm Capital Economics attributes the 10 percent monthly gain to the fading of the downward distortion seen in the aftermath of the homebuyer tax credit.
“We doubt that it is the start of a real recovery, which may now be further delayed by the foreclosure crisis,” Dales said, referring to the paperwork deficiencies uncovered in some of the nation’s largest servicing shops. “Existing sales have risen by a spectacular-sounding 18 percent in just two months. But such gains are only possible because sales had fallen so far.”
Dales added, “The poor economic climate, widespread negative equity, and a decline in the desire to own a home will weigh on home sales for at least three years. Supply remains high too. At 4.0m in September, there were roughly 1.5m too many homes up for sale relative to demand. The upshot is that prices will remain under
downward pressure until demand moves back in line with supply. That’s going to take years, rather than months.”
The September gain boosted the annual sales pace to 4.53 million units. August’s annual rate was revised downward to 4.12 million. Sales of pre-owned homes remain 19.1 percent below the 5.60 million-unit pace in September 2009 when first-time buyers were ramping up in advance of the initial deadline for the tax credit last November.
The increases in September’s sales were widespread across the country compared to the previous month, with all regions reporting gains. Nationally, total housing inventory fell 1.9 percent to 4.04 million existing-homes available for sale, which represents a 10.7-months supply at the current sales pace. That’s down from a 12-months supply in August.
Lawrence Yun, NAR’s chief economist, said, “Vacant homes and homes where mortgages have not been paid for an extended number of months need to be cleared from the market as quickly as possible. Inventory remains elevated and continues to favor buyers over sellers. A normal seasonal decline in inventory is expected through the upcoming months.”
The median and average sales price of existing homes declined 2.4 percent and 1.7 percent, respectively, from a year ago. According to NAR’s data, the national median existing-home price for all housing types was $171,700 in September.
Distressed homes accounted for 35 percent of sales in September compared with 34 percent in August. They were 29 percent in September 2009.
Chris G. Christopher, Jr., senior principal economist for IHS Global Insight, commented, “The housing market is at very depressed levels. This report is relatively good news but the housing market situation has a long way to go before it fully recovers. The question remains of the impact of the foreclosure debacle that reared its ugly head in the latter part of September. The impact will be felt in the October numbers.”