March existing home sales -- Ugh!
* Total sales fell a sharp 8.4% to a seasonally adjusted annual pace of 6.12 million from 6.68 million in February. March’s sales rate was down 11.3% from the same month a year ago and the lowest since June 2003.
* Median home prices fell again – down 0.3% from March 2006. That’s the eighth month in a row that prices declined from a year ago, the longest such stretch on record.
* For-sale inventory remains the real bugaboo. The total number of homes for sale came in at 3.745 million units, down slightly (1.6%) from February but up a sharp 17% from the same month a year ago. On a months supply at current sales pace basis, inventories are running at 7.3 – just shy of the October cycle high (7.4)
No amount of lipstick can make this pig of a home sales report look pretty. Sales dropped sharply. Prices fell again. And inventories are closing in on the 14-year high set in late 2006. No doubt, crummy weather had an impact on the figures. But sales were poor in all regions, down 6.2% in the South, down 9.1% in the West, down 8.2% in the Northeast, and down 10.9% in the Midwest. That tells me a lot more is at work here – namely, that affordability is still poor, that speculators have left the building, and that tighter mortgage standards are starting to knock marginal buyers out of the market.
Supply is still the biggest problem in my book. We’re seeing three forces keep inventory levels high – and I doubt they’ll go away anytime soon:
1) The “March of the Re-Listers” – They’re the people who tried to sell last year and couldn’t. They pulled their homes from the market over the holidays, but now they’re putting them back on the MLS again to capture the seasonal upswing in activity we see every spring.
2) Lots of our nation’s homes are in “weak hands” – 40% of the homes sold at the tail end of the boom were bought as investments or second homes. Those owners are more likely than owner-occupants to try to sell and cut their losses when the market turns south.
3) Forced sales due to foreclosures -- A company called RealtyTrac tracks monthly foreclosures – They surged 47% from a year ago to around 149,000 in March. That’s the highest reading yet for this series, which data goes back to January 2005. As mortgage defaults and foreclosures rise, more motivated sellers (banks, mortgage lenders, etc.) will dump the homes they've repossessed on the market.
Looking ahead, April could prove to be another weak month. The National Association of Home Builders index recently dropped to 33, leaving it just above the multi-year low of 30 set in September 2006. Also, the Mortgage Bankers Association’s purchase application index just slumped to a two-month low.