Tag Archives: co-ops

Pending Home Sales Rise — But Don’t Expect the Housing Market to Recover Soon

There was some unexpected positive news on the housing front today: pending home sales rose in April 2008 to the highest level since October 2007, according to the National Association of Realtors (NAR).

NAR complies a monthly “Pending Home Sales Index” (PHSI), which tracks housing contract activity based on signed real estate contracts for existing single-family homes, condos and co-ops. Modeling for the PHSI looks at the monthly relationship between existing-home sale contracts and transaction closings over the last four years. The PHSI gives figures for the nation and four regions, and includes seasonally adjusted as well as not seasonally adjusted figures.

A reading of 100 on the PSHI is equal to the average level of sales activity in 2001.

April’s PHSI figures show that the seasonally adjusted index of pending sales for existing homes across the nation rose to 88.2 percent from a March reading of 83.0 percent.

March’s figure of 83.0 percent was the lowest since the index was started in 2001.

Moreover, the April 2008 figure of 88.2 percent is still 13 percent below April 2007’s reading of 101.5 percent.

Some regions fared much better than others.

The region that did best was the West — with a seasonally adjusted figure of 98.8, its highest level since June 2007.  The West also showed an 8.3 percent increase from last month and a 4.0 percent increase from 95.0 percent a year ago. 

The Midwest — at a seasonally adjusted rate of 83.7 percent — posted a 13.0 percent increase from last month, but a 13.1 percent drop from last year’s figure of 96.4 percent.

The South — at a seasonally adjusted rate of 88.8 percent — showed a moderate 4.6 percent increase over last month, but that was still a stunning 22.5 percent decline from last year’s figure of 114.6 percent.

The worst region in regard to pending home sales was the Northeast — with a seasonally adjusted rate of 79.3 percent — which indicated both a monthly decline ( -1.9 percent) and a sharp decline (-12.2 percent) from 101.5 percent a year ago.

As usual, NAR strained to see these very modest national gains in the most positive light, claiming that they show that “the underlying fundamentals point to a pent-up demand.”

NAR chief economist Lawrence Yun again predicted that an upturn in the housing market is just around the corner.

“Home sales are at about the same level as they were 10 years ago, yet the population has grown by 25 million people and we have over 10 million more jobs,” Yun said. “The housing market has been underperforming by historical standards, partly because buyers were hampered by mortgage availability issues, but that’s improved and an upturn is more likely.”

Other analysts are not nearly as optimistic about the meaning of the PHSI figures. 

They point out that banks are dumping properties at fire-sale prices, and that inventories will continue to grow as foreclosures continue to rise.  NAR’s PHSI does not differentiate between full-market sales, short-sales, and foreclosures.

Even NAR’s economist Lawrence Yun acknowledges that much of the increase in pending home sales comes from “bargain hunters” who have “entered the market en mass.”

The New York Times reports that Mark Zandi, the chief economist for Moody’s economy.com, believes that April 2008 marks the bottom for home sales, but he also believes that home prices won’t bottom out for another year. ”It’s the beginning of the end of the housing downturn, but it will be a long painful ending,” he said.

We think that Zandi is being overly optimistic — when the housing downturn ends depends on many factors, including straightening out the mortgage and credit industries, that are still a very long way off.

 

Home Sales Set Record Low (Again) — Prices Decline and Inventory Sets Another Record

Existing home sales fell again to another record low in April.

The National Association of Realtors (NAR) reports that “Existing-home sales – including single-family, townhomes, condominiums and co-ops – declined 1.0 percent to a seasonally adjusted annual rate of 4.89 million units in April from an upwardly revised pace of 4.94 million in March, and are 17.5 percent below the 5.93 million-unit level in April 2007.”

The figures represent another record low since NAR has began keeping records in 1999.

The biggest decline was in sales of apartments and condominiums, which plunged 5.2 percent after two months of rising sales.

Demand for single-family homes dropped 0.5 percent in April.

NAR also reported that the national median existing-home price for all housing types was $202,300 in April, an 8.0 percent fall from April 2007 when the median price was $219,900.

Perhaps the worst news is that the inventory of homes for sale has continued to rise and is now at its highest level in more than 20 years. 

Inventory rose 10.5 percent to 4.55 million existing homes available for sale, an 11.2-month supply.  With so many homes on the market, it is likely that prices will continue to decline.  And with foreclosures continuing to flood the real estate market, it is expected that price declines will continue for at least several more months.

In addition, continued home price declines are keeping homebuyers, as well as investors, out of the market, as they expect even cheaper home prices in the near future. 

In other words, despite (and, to a large extent, because of) sharply declining prices, supply continues to rise while demand continues to fall.

Not a pretty picture for real estate.

As is usually the case, some regions fared better than others:

April sales dropped 6 percent in the Midwest and 4.4 percent in the Northeast, but rose 6.4 percent in the West (see our post on rising home sales in Orange County, California). 

Sales stayed steady in the South. 

Median prices fell across all regions.

In the West, the median price was $285,700, 16.7 percent lower than April 2007.  In the South, the median price was $170,800, down 5.1 percent from a year ago.  The median price in the Northeast was $262,000, 7.7 percent below April 2007.  The median price in the Midwest was $159,100, down 2.9 percent from April 2007.

NAR points the finger at the mortgage industry, blaming “restrictive lending practices” for the decline in sales, the lower home prices and the increasing inventory.

Always the optimist, NAR chief economist Lawrance Yun said that recent changes in lending would help homebuyers. “I would encourage buyers who were disappointed by poor mortgage options to take another look at the market because the lending changes are significant,” he said. “Also, a recent notable drop in interest rates on conforming jumbo loans will help consumers in high-cost markets like California and New York.”

We’re not holding our breath.