Existing home sales disappoint

The National Association of Realtors reported sales of existing homes fell 3.0 percent in March after a gain of 4.9 percent in February. More than ever before, sales are being driven by foreclosures and short sales that now account for over half of the overall sales total.
Volume fell to a seasonally adjusted, annualized rate of 4.57 million units as a result of a 2.8 percent decline in single-family home sales and a 4.1 percent drop in condominium sales.

The decrease in total sales was paced by an 8 percent slump in the Northeast and purchases also fell in both the West and in the South while Midwest home sales were flat.

After five months of sharply lower sales volume following the credit market crisis last fall, it would appear that a new bottom in sales may be forming at about the 4.5 million mark.

Supply remained at about double the normal level at 9.8 months, up from 9.7 months, and the median sales price rose from $168,200 in February to $175,200 in March. This represents a decline of 12.4 percent from year-ago levels.

Lawrence Yun, NAR chief economist noted the following:

The share of lower priced home sales has trended up, indicating a return of many first-time buyers, which we also see in a parallel member survey. Sales in the upper price ranges remain stalled because of higher interest rates on jumbo loans.

Buyer traffic has been rising, and real estate offices are getting phone inquires about the tax credit. By early summer we should be seeing a positive impact on home sales from record-low mortgage interest rates in addition to the stimulus provisions.

One thing to keep an eye on this year is the changing mix in real estate sales as an increasing number of higher-priced homes are sold after moving through the foreclosure process.

According to RealtyTrac, a California based provider of mortgage default data, a total of 803,489 properties entered some stage of foreclosure during the first quarter, and a growing number of these properties are more expensive homes.

As these distressed properties are sold at reduced prices, it will provide support to the "median" sales price, simply due to the manner in which the median is calculated (i.e., the point above and below which half the samples fall).

Look to the S&P Case-Shiller Home Price Index for a better gauge of which way property values are moving throughout 2009.