Home Sales and Prices Down, but…

The latest National Association of Realtors’ figures are out, and existing home sales have fallen for a sixth-straight month.

January sales dropped to 4.89 million nationwide, 0.4 percent less than last month. Year-over-year sales were down 23%.

Economists had predicted that existing home sales would fall to 4.80 million.

Median home prices as reported by the NAR dropped to $201,100. Last January the median was $210,900.

Additionally, the total of homes for sale rose 5.5% to 4.19 million. Which represents a 10.3-month inventory of homes on the market.

While this report shows the market declining at a slower pace than expected, investors should be fully aware of the nature of the NAR report before trying to call a bottom to the industry’s decline.

First, while it is true that the NAR statistics show a smaller drop in home sales than expected, a drop is still a drop. Additionally, the NAR only measures contracts signed, and not actual closings. One can expect that a number of contracts will not result in sales.

Additionally, an increase in overall home inventory will result in more downward pressure on home prices.

There has been recent (relatively) positive news in housing, and investors should watch the reports carefully, but I still think it’s way early to call a turnaround to this market. Once we see several months of declining inventory and stable new-home and existing-home sales, as well as less-restrictive credit markets, then we can start talking about reaching bottom.