U.S. resale housing market posts some hopeful gains
Amidst a backdrop of crumbling credit markets and stock indices desperately looking for the bottom, the U.S. resale housing market showed some promising signs in September as existing home sales rose 5.4% over August and posted their first year-over-year gain in three long years. Nationwide, home sales rose 1.4% in September over the previous year.
The sales jump, which took economists by surprise pushed active listing inventories down by 1.6% and brought the second consecutive month of inventory declines. Still, a near 10-month supply of residential property is available for purchase across the United States.
Home prices continued to post losses and reached their lowest level since April 2004. The median price of a U.S. home fell to $191,600, down nine percent from one year ago.
According to a story in the Globe and Mail, Lawrence Yun, chief economist for the National Association of Realtors (NAR) attributes increased unit sales to a “rise in foreclosure and other ‘distress sales’ in regions of the country hard-hit by the ongoing housing downturn.”
“In some regions, the lower prices are seeing buyers return to the marketplace,” he said. “This was a nice jump, and hopefully this trend can continue because the first step to stabilizing the market is an increase in home sales.”
Read the Globe and Mail story here.
Read NAR’s media release here.
See the current U.S. real estate stats here.
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Norm Fisher
Royal LePage Saskatoon Real Estate
9 comments so far. We'd love to hear your thoughts.
October 25th, 2008 at 1:01 PM
I recall reading about that here:
http://tinyurl.com/5ve4nw
“Sales in September 2008 (5.18 million SAAR) were higher than in September 2007 (5.11 million SAAR). This is the first time sales have increased for any month year-over-year since November 2005.
It’s important to note that a large percentage of these sales were foreclosure resales (banks selling foreclosed properties). NAR economist Yun suggested that “distressed sales are currently 35 to 40 percent of transactions”. Distressed sales include foreclosure resales and short sales. Although these are real transactions, this means activity (ex-foreclosures) is running around 3 million units SAAR.”
A hopeful situation for buyers, to be sure. It is nice to see inventory decreasing- that’s the first step to this thing turning around, I think.
October 25th, 2008 at 1:30 PM
Crikey,
Some signs of a meaningful recovery of the U.S. housing market would bring some light at the end of the tunnel. This news, I think, falls short of providing that spark. While it’s certainly positive, conditions have changed dramatically since September and those changing conditions may just smother the spark. I hope I’m wrong.
October 25th, 2008 at 3:37 PM
Norm,
I hope you are wrong as well. The American consumer is tapped out, no longer able to tap into the housing ATM. That economy is consumer based, %55 I believe and the gains in all markets ( housing, stocks) in the last 10 years were because of credit. Real income as actually decreased over this time. The same has happened in Canada in regards to income.
I know that many say the light at the end of the tunnel is when housing is corrected. But even when that happens, gains in housing will be less than inflation. It will be a slow recovery. And the funny thing is with all these bailouts and government intervention there has been nothing to help out these homeowners.
October 26th, 2008 at 9:16 AM
Norm,
If one is to believe the “smart guys” it’s going to be a long bumpy road. According to Helmut Pastrick, Chief Economist (Central Credit Union):
According to Pastrick the AVERAGE cycle lasts 39 months. Pastrick’s arithmatic tells us that the average cycle is THE AVERAGE of a period that extends “between 9 and 65 months”.
Looking at local cycles and the peripheral elements that affect these cycles my arrow is pointing to the 65 months.
BTW, I’ve ordered new full body armor (on credit of course). I checked they have your size.
October 26th, 2008 at 10:31 AM
Larry,
I don’t doubt it. Recent developments have to deliver a major setback. The banks own most of the homes and now they’ll be reluctant to lend on them.
October 26th, 2008 at 11:56 AM
I’m with Crikey on this one. These are false numbers made for headlines that don’t reveal the underlying methodology of their collection.
In the US, As I Understand It (Norm, please correct me if I’m wrong!) foreclosures are counted as ‘sales’ because the transaction involves a RE broker. As such, many of these ‘sales’ do not represent people coming into the market as they buy a home, but rather people leaving the market as their home is repossessed.
That might explain why, in the article’s own words, “The sales jump … took economists by surprise….”
In other news, we’re not out of the woods yet. The ‘Real Economy’ — the one where people have real jobs and produce real things instead of just moving money around and charging transaction fees — is still in trouble. Note this piece of news: GM stops paying into employees’ 401k funds (US equiv of RRSPs):
http://www.reuters.com/article/idUSTRE49M4U320081023
While this move might save GM *some* money, it can’t be all that much in the grand scheme of things… and the cash saved will be greatly out of proportion with the morale loss it will cause among the employees. Things may be even worse than publicly admitted if they are willing to make that sort of trade-off…
October 26th, 2008 at 2:19 PM
Bookrat,
“In the US, As I Understand It (Norm, please correct me if I’m wrong!) foreclosures are counted as ‘sales’ because the transaction involves a RE broker.”
I’ve never heard of such a thing. Why would a bank utilize a broker in foreclosing on a home? To the best of my knowledge, these numbers represent actual resales from a registered owner (bank or private owner) to a new buyer. What you’re suggesting would have resulted in an increase in active inventory, and not a decrease as has been reported in this story. No?
NAR’s methodology is here.
http://www.realtor.org/research/research/ehsmeth
October 26th, 2008 at 3:07 PM
Douglas Quance, an Atlanta real estate broker says, “September Gains Were Not A Sign Of A Housing Recovery.”
“At first blush, these numbers look promising – but what the media fails to analyze is how changes in financing is responsible, in part, for these gains. The housing bill that was passed into law in July banned down payment assistance programs, and virtually all lenders immediately canceled those programs for loans that would not fund by September 30, 2008. Buyers who needed to take advantage of these programs moved quickly to ensure that they could buy their homes.”
http://tinyurl.com/quance
October 26th, 2008 at 3:55 PM
Just to be clear, I wasn’t arguing that the NAR’s stats nor their reporting of them were false, Bookrat. All I was intending to point out was that an extremely large percentage of the sales appear to be “distressed” sales. A good opportunity for buyers with large amounts of cash, perhaps, but certainly not encouraging news all around.