My take on January Existing Home Sales
* Sales rose: The seasonally adjusted annual rate of sales rose 3% to 6.46 million from 6.27 million units in December. The market was only expecting a 0.3% gain. So that’s good news? Well, not exactly. That’s because ...
* Home prices dropped sharply: The median price of an existing home tanked by $11,000, or almost 5%, between December and January. At $210,600, existing home prices haven’t been this low in 22 months. This makes one thing crystal clear: Home sellers HAVE to be aggressive on price if they want to sell. One key reason ...
* Inventories are climbing again because of the "March of the Re-Listers": The number of homes for sale rose to 3.549 million units from 3.45 million in December, a gain of almost 3%. Why is this important? Well, a lot of people crowed about the decline in inventory for sale in November and December. They said it was proof the market was stabilizing.
I argued differently. I pointed out that this was entirely seasonal – home inventories almost ALWAYS fall late in the year because of the holidays. Specifically, sellers who fail to sell during the peak spring and summer selling seasons pull those homes from the market around Thanksgiving, then start re-listing them early the following year.
This "March of the Re-Listers" is clearly underway in 2007. I expect the inventory numbers to continue rising in February, March, and April, and we may very well set a new high.
All in all, the housing market is still struggling. Mortgage purchase activity has trailed off. Inventories remain extremely high. And sellers are being forced to cut prices to bring in buyers. Expect conditions to remain weak throughout 2007, with many local markets doing poorly into 2008.