Resale home sales for December rose 5.0 percent to a seasonally adjusted annual rate of 4.61 million in December after jumping 4.0 percent in November, according to the National Association of Realtors who reports sales are 3.6 percent higher than in December 2010. Sales data is still far below what economists consider to be a healthy real estate market, however, this marks the third consecutive month of improving sales reports and a total 1.7 percent increase in sales for the year.
Breaking from their consistently cautious tone, Dr. Lawrence Yun, NAR chief economist, said these are early signs of what may be a sustained recovery. “The pattern of home sales in recent months demonstrates a market in recovery,” he said. “Record low mortgage interest rates, job growth and bargain home prices are giving more consumers the confidence they need to enter the market.”
Supporting Yun’s statement, in January, interest rates have dropped which directly spurred the volume of mortgage applications not only for refinances but for new home loans. Pending home sales hit their highest level in 19 months and new home sales jumped 10 percent for the year, however, home prices continue to slide, mostly due to distressed sales.
Inventory at the close of December fell 9.2 percent to a 6.2 month supply, as available inventory dropped to its lowest level since March 2005, one of the healthiest signs of a pulse from the market we have seen in some time, although distressed sales are stagnant, indicating that the foreclosure backlog (from slowed and frozen processes due to the robosigning debacle wherein foreclosures were being illegally processed without any human review of files) has yet to clear up, which some say could increase the foreclosure inventories by 25 percent this year.
Home pricing drops
After home prices drop to 2002 levels and we take foreclosure backlogs, it is surprising that Dr. Yun would say, “The inventory supply suggests many markets will see prices stabilize or grow moderately in the near future.”
The national median existing home price for all types of housing was $164,500, down 2.5 percent over the year, as distressed sales accounted for 32 percent of sales in December, up 3.0 percent from the month prior and down 4.0 percent from December 2010. Foreclosures sold for an average discount of 22 percent, up 2.0 percent from the previous year, while short sales sold an average of 13 percent below value, down 3.0 percent over the year.
All-cash sales were up 2.0 percent for the month, accounting for 31 percent of December purchases, mostly comprised of investors who purchased 21 percent of homes in December.
First-time buyers fell to 31 percent of transactions in December from 35 percent in November and 33 percent in December 2010.
Contract failures continue to be a factor with over one in three NAR members having experienced a contract failure for the month, up from 9.0 percent in December 2010, mostly due to declined mortgage applications and failed underwriting as appraised values are coming in below the negotiated price, according to the trade association.
Resale homes rose 10.7 percent in the Northeast, up 3.3 percent for the year. The region now has a median price of $231,300, down 2.7 percent for the year. In the Midwest, resale homes increased 8.3 percent for the month, up 9.5 percent for the year with a median price of $129,100 which fell 7.9 percent over the year. In the South, resales homes rose 2.9 percent for the month and 3.5 percent for the year with a median price of $146,900 which dropped 1.1 percent from December 2010. The Western region saw a 2.6 percent for the month, falling 0.8 percent for the year with the median price dropped 0.3 percent for the year to $205,200.
NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, said more buyers are expected to take advantage of market conditions this year. “The American dream of homeownership is alive and well. We have a large pent-up demand, and household formation is likely to return to normal as the job market steadily improves,” he said. “More buyers coming into the market mean additional benefits for the overall economy. When people buy homes, they stimulate a lot of related goods and services.”