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Existing home sales plunge
Monday, January 25, 2010
The NAR (National Association of Realtors) reported that sales of existing homes plunged 16.7 percent in December from a seasonally adjusted annual rate of 6.54 million units in November to 5.45 million last month, the lowest rate of sales since August.
It is no coincidence that the sharp decline came just after what was believed to be, at the time, the expiration of the government's $8,000 homebuyer tax credit late-November, a stimulus program that has since been extended until this spring.
As incentive programs such as this one are more likely to "pull demand forward" rather than create new demand for housing, the property market will be watched closely in the coming months to see how big an impact this will have.
Since there is a huge difference in typical sales volume throughout the year - summer sales often two or three times the volume seen in January and February- seasonal adjustments will also play a crucial role in analyzing the data in the months ahead.
For example, the sales spike in October and November came at a time of the year when sales volume is typically declining into the year-end holiday season and, in the graphic above, this likely appears much larger than it would if the tax credit were to have expired in July instead of just after Thanksgiving.
Similarly, the January and February sales data to be reported in the coming months may see distortions to the downside since, what is normally a dearth of sales during this time of the year may turn into a virtual cessation of buying. The seasonally adjusted data that comes during these two months of the year is always suspect, this year, it may be downright nutty.
The NAR reported that the inventory of unsold homes rose from a four-year low of 6.5 months of supply in November to 7.2 months in December, but this statistic too is greatly affected seasonal factors. Given that optimism for the property markets in parts of the country has been rising and more potential sellers will think now is a good time to list their homes for sale, this combination of factors - fewer buyers and more sellers - could see the inventory numbers move much higher over the winter.
It's going to be another interesting year for real estate.
6 comments:
Yay! Count my house as one of those unsold ones... (yes, the "Yay" was sarcastic).
At the Huffington Post, the headline reads:
Biggest Monthly Drop In 40 Years, First-Time Buyers 'Exit Stage Left' As Tax Credit Expires
If they would just let the prices fall to clear the market, homes would sell. If they would just get rid of non safety zoning of McMansions, people could afford new homes.
The bank wants to keep prices high, and force citizens to borrow endless oodles of cash from China to pay for them. Madness.
The home sales report came as Obama unveiled a series of tax breaks and other measures to ease pressures on the embattled middle class.
I want to buy. But I haven't bought and probably won't anytime soon. It has nothing to do with the tax credit. The credit barely covers closing costs.
I haven't bought because the run-down rat shacks on the market in my price range and in my area (in northern orange county, targeting 20% down and 33% of the gross of my admittedly median wage) are barely even worth the time of reading the MLS listings, let alone visiting the properties.
The plain fact of the matter is that the prices are too high. Until they come down and until employment picks up (yes, turns around and starts increasing not just the 'less bad' situation of fewer people laid off today than yesterday while those on UI have their benefits expire resulting in "lower" numbers of unemployed), the market has nowhere to go.
If resetting the housing market is imperative, what must be done is to rush through foreclosures, get rid of the junk assets, let the big guys fail, default the garbage, sell it at an equitable market value which can be reasonably financed, take the hits that have to be taken, and get on with our lives. This 'pull-the-band-aid-slowly' tripe that's going on in washington is hurting us more than the irrational exhuberance that tore our flesh in the first place.
Banks do not want prices to fall because that would make a lot of the toxic assets that they are still holding worthless. They need to buy time to unload them. I am not buying until interest rates are forced much higher to squeeze the leverage out.
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