On February 25, 2014 existing home sales data for January was released. Not a big surprise that sales of existing homes fell to the lowest level in a year and a half. Existing home sales (the completed transactions of single-family homes, townhomes, condominiums and co-op’s) dropped 5.1 percent. This gave us a seasonally adjusted annual rate of 4.62 million sales. In December, it was 4.87 million, and if the market was balanced, it would be closer to 6 million.
So what are the factors that contributed to this decrease? Lawrence Yun, NAR chief economist, says unusual weather is playing a role. “Disruptive and prolonged winter weather patterns across the country are impacting the wide range of economic activity, and housing is no exception.” He also says, “Some housing activity will be delayed until spring. At the same time, we can’t ignore the ongoing headwinds of tight credit, limited inventory, higher prices and higher mortgage interest rates. These issues will hinder home sales activity until the positive factors of job growth and new supply from higher housing starts begin to make an impact.”
Here is how existing homes sales are broken out regionally:
Midwest dropped 7.1 percent to an annual rate of 1.04 million. The median price was $140,300, which is up 7.6 percent over last year.
South dropped 3.5 percent to an annual rate of 1.95 million. The median price was $161,500, which is up 9.4 percent over last year.
West dropped 7.3 percent to an annual rate of 1.01 million. The median price was $273,500, which is up 14.6 percent over last year.
There has been some interesting information lately about real estate inventory and its relationship to foreclosures and short sales (pre-foreclosures).
The total housing inventory rose in January 2.2 percent to 1.9 million existing homes for sale. Remember, we always look at inventory as how it relates to months of supply. At the end of January, we were looking at a 4.9 month supply at the current sales pace. Remember that a neutral market (either buyer or seller) is a 6 month supply.
Part of the decrease in inventory can be attributed to far fewer foreclosures and short sales. In January, foreclosures were only 11 percent of sales and short sales were only 4 percent of the market. If you consider that at times, these segments were close to 50 percent of the inventory, this is a dramatic change.
I also saw some interesting stats about homeownership rates among those who lost their homes from 2007-2013 because of foreclosure or short sale. This information comes from John Burns Real Estate Consulting:
- 889,000 have already repurchased a home.
- 1.6 million will be stuck renting for at least the next seven years.
- 2.8 million will become homeowners again by 2021 (“boomerang” buyers).
The last indicator I want to look at is Housing Affordability, which stayed steady in the fourth quarter of 2013. According to the National Association of Home Builders (NAHB)HHHH Housing Opportunity Index (HOI), 64.7 percent of new and existing homes sold for the fourth Q 2013 were affordable to median income families. The third Q of 2013 was close to the same of 64.5 percent. What this means is that a little less than 65 percent of average families can afford to buy a home.
“Housing affordability is stabilizing at a time when pent-up demand and ongoing job growth are helping housing markets across the nation to gradually strengthen,” says NAHB Chairman Kevin Kelly, a home builder and developer for Wilington, Del.
It will be very interesting to see what the spring has to bring.
Diana D. Hill – firstname.lastname@example.org