Housing Sales Rise, But Prices Continue to Drop

The National Association of Realtors is out with its Q3 data on home sales.  As you would expect, there is some positive data and some cautious data.  The group reported that most states continued to see rising existing home sales, but prices “moderated” in many metro areas.

The total state existing-home sales rose 11.4% to an annual rate of 5.3 million units.  This is up from 4.76 million units on an annualized basis in the second quarter, and is 5.9% above the 5.01 million units on an annualized basis in the third quarter of 2008.  The sequential quarterly gains were seen in 45 states and in Washington D.C., but some 28 states and D.C. saw double-digit percentage gains. Compared to Q3-2008, the report said sales were higher in 32 states and D.C.

The credit is being attributed to the first-time home buyer tax credit.  Also noted was that the buying conditions this year are the most favorable on record dating all the way back to 1970.

But most coins come with a tales on the other side of the heads.  The NAR reported that 123 out of 153 metropolitan statistical areas reported lower median existing single-family home prices over the third quarter of 2008.  It noted that 30 areas had price gains.

The national median existing single-family price was down 11.2% from last year at $177,900.  There is a continued trend for distressed sales in foreclosures and short sales, which was 30% of the purchase transactions.  This continues to weigh on home prices.

What is interesting is that he NAR noted how a shrinking supply of unsold inventory suggests that housing is getting closer to price stabilization in many areas.  It also noted that “a steady stream of financially qualified buyers” is needed to further reduce inventory.  Foreclosures coming on the market are expected to continue, but rising sales from the expanded tax credit should stabilize home prices by next spring (and supposedly help to stem future foreclosures).

The Freddie Mac national average commitment rate on a 30-year conventional fixed-rate mortgage rose to 5.16% in the third quarter from a the lowest level of 5.03% in the second quarter.  That is still lower than the 6.32% average rate in the third quarter of 2008.

The biggest gains are in area you might not guess: North Dakota up 42.3%, Rhode Island up 26.5%, Pennsylvania up 25.6%.  Existing-home sales in the Northeast rose 16.7% at an annualized pace of 930,000 units.  The Midwest region saw existing-home sales rise 13.2% at an annualized pace of 1.2 million units.  The South saw existing-home sales rise 11.3% at an annualized rate of 1.97 million units.  The West showed an increase of 5.6% at an annualized pace of 1.19 million units.

As long as we keep having foreclosures and short sales this high, the government is going to have to keep that tax credit going far longer than its recent extension.  If you parse through the data the median home prices are far lower than what looks and feels like an average home price’ in the price ranges out there in either more affluent or at least above-median neighborhoods.  There is still a price-range No-man’s land out there, so if you have a house in the $300,000 to $1 million range then you might not be seeing the same trends.

JON C. OGG