Home sales up, home sales down

Existing home sales are down to another record low, from the New York Times:

Sales of previously owned homes, which make up the bulk of the housing market,
dipped 1 percent in April, to an annual rate of 4.89 million, the second
consecutive month that sales have declined. That figure represents another
record low, although the report, put out by the private National Association of
Realtors, dates only to 1999.

But, on the other hand new home sales are up. From CNN:

New home sales rose unexpectedly in April but remained near historically low
levels, according to a key government report on the battered housing market.

April sales came in at a seasonally-adjusted annual rate of 526,000, a
Census Bureau report showed, up 3.3% from a revised 509,000 in March, but 42%
below April 2007. The reading was above the consensus forecast of 520,000,
according to economists surveyed by Briefing.com.

The median price of a new home sold in April was $246,100, up 1.5% from $242,500 a year earlier.

The report showed a 10.6-month supply of homes available on the market.

Perhaps all of the discounting, upgrading, and other perks offered by homebuilders are finally having some effect on new home sales.

Photo: See-Saw, originally uploaded by pittsinger.

Pending home sales hit another low

From CNN:

The number of homes under contract for sale fell in March, hitting a record low
for the second consecutive month, according to a report released Wednesday.

The National Association of Realtors' (NAR) Pending Home Sales Index
fell to 83 in March, down 1% from a downwardly revised reading of 83.8 in
February. The rate of decline was in line with a consensus estimate of
economists compiled by Briefing.com.

March's reading was down 20.1% from the same period last year and 35% from the index's peak in April 2005.

and from Bloomberg:

Fewer Americans signed contracts to buy previously owned homes in March for the
second consecutive month as falling prices and tougher loan rules discouraged
buyers.

The index of pending home resales fell 1 percent to 83,
following a 2.8 percent drop in February that was larger than previously
reported, the National Association of Realtors said today in Washington. The
decline matched the median forecast of economists surveyed by Bloomberg News.

The glut of unsold properties is driving down home values, while rising
defaults on subprime mortgages have prompted lenders to restrict access to
credit, representing more hurdles for buyers. The slump in residential real
estate may persist for much of the year, hurting economic growth.

Yet another record low in the pending-sales index .

With home prices falling, inventory surging, and credit and mortgage options limited, the downward trend in home sales seems to have reasserted itself after a brief uptick last fall.

These latest NAR numbers, which show a continuing decline in pending home sales as well as a downward revision from the last report, only serve to confirm what’s been said many times before: that we are still months away from a recovery in the real estate housing market.

The pending-sales index reports contracts signed, but not closed, and the value of the index lies in its forward-looking predictive ability to forecast existing home sales. Existing home sales represent the bulk of the market.

Real estate investors should take the lastest NAR figures as a sign that the downward pressure on prices will continue, and that a rebound in the short-term is highly unlikely. Still, tremendous opportunities abound on individual properties for the motivated investor willing to find them.

Photo: UP or DOWN / BLACK or WHITE, originally uploaded by Luichi74.

Existing home sales slip in March

From the National Association of Realtors:

Existing-home sales – including single-family, townhomes, condominiums and
co-ops – were down 2.0 percent to a seasonally adjusted annual rate (1) of 4.93
million units in March from a level of 5.03 million in February, and remain 19.3
percent below the 6.11 million-unit pace in March 2007. A rise in condo sales in
March was offset by a drop in single-family sales. Regionally, sales rose in the
Northeast and West but fell in the Midwest and South.

and:

The national median existing-home price (2) for all housing types was $200,700
in March, down 7.7 percent from a year ago when the median was $217,400. Because
the slowdown in sales from a year ago is greater in high-cost areas, there is a
downward pull to the national median with relatively higher sales activity in
low-cost markets.

and, more relevantly:

In the South, existing-home sales fell 3.5 percent to an annual rate of 1.92
million in March and are 20.0 percent below March 2007. The median price in the
South was $167,200, down 7.1 percent from a year ago.

Blamed by the NAR for the decline in home sales are restrictive lending practices which have prevented many potential purchasers from being able to buy a home. While lending practices and guidelines such as insisting upon relevant down payments, documentation of income, and higher minimum credit scores required for loan qualification may seem restrictive compared to the wild-west rules of the past few years, to many they represent a return to a more rational lending environment seen before the days of MBSs, CDOs, tranches and hedge funds. Regardless, the truth of the statement is evident, and it is the mortgage lenders, the loan programs they offer, and the limited number of buyers who can obtain financing which continue to drive sales numbers down.

The first question to any potential purchaser is whether they can get a mortgage.

Total housing inventory rose 1.0 percent at the end of March percent to 4.06
million existing homes available for sale, which represents a 9.9-month supply
at the current sales pace, up from a 9.6-month supply in February.

This is not a good thing. Again, this shows that we can probably expect continuing price depreciation for the foreseeable future. As homebuilders, existing home owners, bank REO departments, and other real estate investors fight for that limited pool of qualified buyers, they will compete on the only level they can: price.

As prices decline, lending practices become even more restrictive. As we’ve seen here in Atlanta, most of the lenders and mortgage insurance companies have declared the city a declining market – and the size of the loans they are willing to extend get chopped 5% off the top, meaning that a potential buyer has to bring that much more to the table to close.

It’s a vicious circle, and unfortunately, one that is likely to continue.

Photo: peal of laughter, originally uploaded by camillesau.