The headlines about today’s housing figures released by the National Association of Realtors paint a continuing bleak picture of falling home sales and falling prices.
A summary:
About 50% of the 4.57 million in March sales were foreclosures and short sales. The large number of these distressed property sales has driven prices lower, year over year. The median price for an existing home last month was $175,200, down 12.4% from $200,100 in March 2008.
Recognize the sinking feeling we all have when we look around and wonder when we’re going to get out of this hole?
Now, I have a slightly different perspective about the hole. I don’t think we’re going climb back up the way we fell down. I think we’re going to have to tunnel out the bottom and end up in a new place altogether. Not a bad place. A new place.
So, I’m looking at the housing data for signs that the market has stabilized, and that inventory is getting worked off at reasonably predictable prices. In that respect, month-to-month and quarter-to-quarter changes are more telling than year-over-year changes.
[Doesn't last March feel like eons ago anyway?]
From that perspective, the March housing numbers aren’t that bad.
Sales have grown 40% since the start of the year, and improved 29% from February to March. The level of increase is consistent with the average for the past decade, and, as the accompanying chart shows, is stronger than the slowdown in 2002 and 2003. In terms of the number of transactions, the Spring market came back at its typical rate. It just started from a much lower base.
I was actually a little surprised by the number of homes sold: my personal forecast had the figure coming in at about 350,000.
Inventory is also working its way off, slowly but inexorably. There is a backlog of supply, between the number of foreclosures banks are managing, forced short sales waiting to come on the market, and whole owners who have various reasons to sell their homes. Price is working its way through as well — since January, median prices have grown 6.3%, a relatively typical seasonal gain.
Economists generally agree that the housing market is showing signs of stabilizing.
The weaker-than-expected result does not change the broad trend in sales, however, which continues to point to a tenuous stabilization… Sales in the western United States, where foreclosure activity is most prevalent, show a distinctly different pattern than those in other regions. Total existing sales (single family sales plus condos and co-ops) are up 19% year-to-year in the West… The improvement in sales in the Western region is an encouraging sign that discounted prices, record low mortgage rates and various tax incentives are stimulating new demand. –Nomura Global Economics
The jobless numbers released today point to a primary reason the housing market is still so muted. The Census Bureau also released a report that showed Americans are not moving from one part of the country to another: internal migration was at the lowest level since 1962.
Those two factors are contributing to the deflated demand for housing relative to the total population. It’s interesting to look at the trend in home sales per household. Since 1995, the U.S. has averaged a home sale for every 20,000 households. During the real estate boom, that number dropped to between 16,000 and 18,000 for four years. Currently, it’s back up to about one home sale for every 23,000 households. At the current level of household population, natural demand for homes is more likely to be closer to 5.75 million than 4.75 million. We just need more economic stability for that demand to surface.
