Existing home sales up - don't get too excited

The National Association of Realtors reported that existing home sales rose from a seasonally adjusted annualized rate of 4.49 million units in January to 4.72 million units in February, almost half of the sales being either foreclosures or short sales.
Though not too much should be made of any of the housing data during the winter months since sales are just a fraction of what they are during the summer months, the inventory of unsold homes remains quite high, rising 5.2 percent in February to 3.8 million units, representing 9.7 months of supply at the current sales rate.

This is about double the normal inventory and, excluding distressed sales from the calculation, this would be about four times typical levels.

Lawrence Yun, NAR chief economist, noted the following:

Because entry level buyers are shopping for bargains, distressed sales accounted for 40 to 45 percent of transactions in February. Our analysis shows that distressed homes typically are selling for 20 percent less than the normal market price, and this naturally is drawing down the overall median price.

The median price for an existing home fell to $165,400 in February, down 15.5 percent on a year-over-year basis and Mr.Yun attempts to dismiss this decline:

Given the downward distortion in price comparisons due to distressed sales, it’s important for owners to keep in mind that this doesn’t equate to a similar loss of value for traditional homes in good condition.

The national data in the most recent report(.pdf) on the Case-Shiller Home Price Index showed an annual home price decline of 18.2 percent, so Mr. Yun is probably seeing things through glasses that might be a bit rosy here.

What a surprise!

It's probably a great time to buy a home...