Interest Rate Roundup

Wednesday, February 23, 2011

Existing home sales rise again in January, prices hit almost 9-year low

We just got our latest look at existing home sales, this time for the month of January. Here's what the numbers showed:

* Sales rose 2.7% to a seasonally adjusted annual rate of 5.36 million units from 5.22 million in December. That was better than the 5.22 million average forecast of analysts polled by Bloomberg. It was also the third month in a row of gains, and it left sales at the highest rate in eight months.

* By property type, single-family home sales gained 2.4% while condominium and coop sales climbed 4.7%. By region, they fell 4.6% in the Northeast, but rose 1.8% in the Midwest, gained 3.6% in the South, and jumped 7.9% in the West.

* The number of homes on the market shrank to 3.38 million from 3.56 million a month earlier. The increase in the sales rate, coupled with the decline in raw supply, drove the "months supply at current sales pace" indicator of inventory down to 7.6 from 8.2. That's the tightest the market has been since December 2009. Median prices slumped 5.9% to $158,800 from $168,800 in December. That was also a drop of 3.7% from a year ago and it leaves prices at the lowest level since April 2002.

So do you want the good news or the bad news? That's what I'd ask anyone looking for my take on the latest housing figures. The good news is that sales rose to an 8-month high, while the glut of housing supply shrank again. The bad news is that it took fire-sale pricing to get buyers to step up to the plate. The median price of a used home in this country fell to less than $159,000, a level we last saw in the spring of 2002.

The bottom line is that housing is a price-driven market. Investors and ordinary home buyers can and will buy houses ... but only if the price is right. That makes life tough for new home builders, who have to compete with distressed properties and "nearly new" foreclosures. But it is slowly but surely clearing out the inventory overhang, and that will eventually help stabilize pricing.


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