Existing Housing Data Could Bring New Waves of Selling

It seems that there is at least a little more good news in the housing sector.  February showed a 5.1% gain year-over-year in sales of existing homes to a rate of 4.72 million annualized.  This doesn’t come without caveats.  The prices are significantly lower and supply is coming on stronger than demand.

Again, this is still good news.  Any time there are more sales than expected in an economy like this, it means things are not just all bad.  The National Association of Realtors said that the February foreclosures and short sales comprised about 45% of sales.

So you know what happened to prices? The association said the abundance of distressed properties and discounts are still discouraging construction and weakening the housing market further.  The median price of $165,400.00 is also down 15.5% from February 2008’s reading of 195,800.  This is the second largest drop on a monthly basis behind January’s 17.5% drop, but this is on average a gain of $600.00 per unit month -over-month.

There is also the inventory issue.  Existing homes keep coming on the market.  The supply rose by 5.2% to end up with some 3.8 million units.  That represents a 9.7 month inventory of used homes on the market.

There is one other issue in pricing.  Any price stability or firming will probably be met by a flood of additional existing homes coming on the market.  The pain out there is real and even if things stabilize or improve there are going to be many who decide to sell into it.  And for that, there are still probably more panic sellers than qualified buyers.

JON C. OGG
MARCH 23, 2009