Existing-home sales declined in January with some buyers waiting to see how details of the economic stimulus package would affect them, according to a ""new report"":http://www.realtor.org/press_room/news_releases/2009/02/january_ehs_inventoryxLID=RONav0021 released on Wednesday by the ""National Association of Realtors"":http://www.realtor.org (NAR). At the same time, the association said, property inventories fell to a two-year low.
According to NAR's market study, existing-home sales - including single-family, townhomes, condominiums, and co-ops - fell 5.3 percent to a seasonally adjusted annual rate of 4.49 million units in January. That figure is down from a level of 4.74 million units in December, and is 8.6 percent lower than the 4.91 million-unit pace in January 2008.
Lawrence Yun, NAR chief economist, said there was understandable hesitation by some home buyers. ""Given so much stimulus package discussion in January, some would-be buyers simply sat out for clarity and certainty on the nature of housing stimulus,"" Yun said. ""The housing market will soon get a lift from very favorable buying conditions - not only from improved affordability, but also from the stimulus of an $8,000 first-time home buyer tax credit, and higher conforming loan limits that will allow more people to tap into 50-year low mortgage rates.""
NAR estimates the impact of the stimulus package and lower interest rates on the housing market to be about 900,000 additional home sales in 2009 compared to conditions before the stimulus package. Inventory is expected to fall below an 8-month supply by year-end, NAR said, which would be consistent with home price stabilization.
Even though property sales dropped slightly, NAR reported that total housing inventory at the end of January fell 2.7 percent to 3.60 million existing homes available for sale, which represents a 9.6-month supply at the current sales pace.
Yun commented, ""The drop in total inventory is an encouraging sign because the number of homes on the market has declined steadily since peaking in July 2008, and inventory is at the lowest level in two years."" As a benchmark, Yun noted that in January 2007, there were 3.54 million homes for sale.
According to NAR's report, a high prevalence of distressed home sales and properties in lower price ranges has skewed the median price to be markedly lower than under normal market conditions. The national median existing-home price for all housing types was $170,300 in January, down 14.8 percent from a year earlier when the median was $199,800. The median price is where half of the homes sold for more and half sold for less.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, commented that we are living in a bifurcated market divided between distressed sales and traditional homes. ""It appears that in many instances a buyer can get a really good deal on a distressed sale, although that home may require some significant effort to bring it up to standard,"" McMillan said. A preliminary analysis by NAR suggests that non-distressed properties are now holding their value much better.
Yun added, ""Distressed sales activity appears to be leveling off, although there are wide differences locally."" To illustrate, Yun pointed to Santa Ana, California, where close to 80 percent of all sales are either foreclosed properties or short sales, but in the Chicago region, less than 20 percent are distressed sales.
About a quarter of all inventory is listed as being distressed, but NAR estimates that distressed sales - foreclosed or those requiring a lender-mediated short sale - comprised about 45 percent of all sales in January. According to Yun, home buyers are competing for homes with deep discounts.
Yun noted that significant local market variations continue. ""A majority of markets experienced sales declines of more than 20 percent from a year ago, but some markets appeared to have reached the tipping point of accelerating home buying,"" Yun said. ""For example, home sales in Las Vegas have more than doubled with some reports of multiple bids.""
Addressing the government's recent economic initiatives and their effect on the market, Yun said it will take a while for the stimulus to show in housing data. Yun said this is largely because of the timeline involved in a property purchase. According to NAR, from the point a buyer starts looking for a home until it is reported as a closed sale can take as long as five months: a median of 10 weeks to search and make an offer, about 6 weeks to close the transaction, and up to 4 weeks to collect and report the data.
Yun said, ""This means improvement from the economic stimulus isn’t likely to show as closed home sales before summer, although we may see an earlier lift from lower mortgage interest rates.""
According to ""Freddie Mac"":http://www.freddiemac.com, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low of 5.05 percent in January. The average rate is down from 5.29 percent in December and 5.76 percent in January 2008.