Existing home sales look for a new bottom

The National Association of Realtors reported sharply lower sales of existing homes during the month of January with more large price declines driven by distressed sales. A full 45 percent of all existing home sales are said to be either foreclosures or short sales.
Sales dropped 5.3 percent from a seasonally adjusted annualized rate of 4.74 million units in December to 4.49 million in January, the lowest pace in 12 years.

On a year-over-year basis, sales were down 8.6 percent and, what looked to be a bottom in home sales last fall (not to be confused with home prices), may now be giving way to a new lower range of activity.

As might be expected and as illustrated in the chart above, the move down from just below the 5 million level to below the 4.5 million level coincided with the latest acceleration in the global credit crisis late last summer, after accounting for the typical delay from real estate sales contract signing until closing.

The inventory of unsold homes declined slightly in January but, due to the lower sales volume, the "months of supply" metric rose from 9.3 months to 9.6 months.

The median sales price fell 3.1 percent to $170,300, the lowest level in almost six years, and home prices are now down 14.8 percent from year-ago levels.

Lawrence Yun, NAR chief economist, noted the following:

Given so much stimulus package discussion in January, some would-be buyers simply sat out for clarity and certainty on the nature of housing stimulus. The housing market will soon get a lift from very favorable buying conditions – not only from improved affordability, but also from the stimulus of an $8,000 first-time home buyer tax credit, and higher conforming loan limits that will allow more people to tap into 50-year low mortgage rates.

Interestingly, according to this report in the Las Vegas Sun the other day regarding the local housing market, one of the "ground-zero" areas where annual price declines still clocked in at minus 33 percent as of December, Mr. Yun had a more upbeat tone:

“You have gone through some very tough times, but any further decline, if any, would be minimal,” Yun said of median prices that have fallen $138,000 over the past two years to a price of $150,000 in January. “Given $150,000 is very affordable for such a dynamic metropolitan region, once the economy recovers, you are in good shape. But it is just getting over the short term.”

During an interview, Yun said he sees Las Vegas prices stabilizing in the second half of the year and by the fourth quarter they could be higher than the end of 2008. The median price at the end of 2008 was $157,250, according to SalesTraq.

Yun said he wouldn’t be surprised if prices appreciate more than 5 percent in 2010 but adds one caveat to his prediction – that while the long-term outlook for the Las Vegas housing market looks good, it is hard to make short-term forecasts.

I wouldn't be surprised if people stop gambling either.

Careful there Larry - that kind of talk is what got your predecessor in trouble...

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