In the current housing market, it has been hard to find any sort of silver lining, but we do see a little positive news today, as existing home sales in July jumped more than expected, mainly due to lower home prices.During July, sales of existing homes rose by 3.1%. This was well above the 1.6% that Wall Street was hoping to see, but analysts caution against assuming that this is a sign that the market has finally bottomed out. Despite beating Wall Street estimates, we still have to consider the fact that home sales were over 13% lower than the same period a year ago.
While we can view the July sales figures as promising, we must also take a minute to look at home inventories, and here the picture is not so rosy. Here we see that the number of unsold single family homes is running at all time highs. Currently the market is trying to deal with a total of 4.67 million unsold homes. This is the highest level that we have seen since 1968 when the National Association of Realtors started monitoring the data.
With inventories at all time highs, it would be hard to conclude that last month's jump in sales is the signal of anything more than a select number of investors gobbling up some reduced property, but still not the type of movement into real estate that is really going to start to turn things around.
Let's take a minute and look at home prices. We have stated that lower prices have led to more than expected sales, but just how much have prices dropped over the past 12 months. According to today's report, the average price for homes sold in July was $212,000. This is 7.1% lower than the average we saw last July, a pretty sizable decline to say the least.
Home prices, and housing inventories are both under pressure from the massive rise in foreclosures that we have seen over the past year, and sadly, that is not something that is close to coming to an end anytime soon either. It is now predicted that by the end of next year, another 2.8 million U.S. households are going to be in trouble by the end of next year. As more and more people are unable to keep up with the mortgage payments, these homeowners are going to be forced to foreclose, turn over their homes, or sell their properties for a loss. The result will be even larger inventories and lower prices. Not a pretty picture.
What many of us are waiting for is to see just how low the market has to go before people are willing to jump back in and start gobbling up the massive amounts of properties that are available out there. Today's news is a positive sign, but we are going to need to see a few more months in a row of this sort of activity before I am willing to believe that we have seen the bottom.
What are your thoughts on the housing market? Have we begun to see things start to turn around? Or can we expect more weakness in the months to come? Let us hear your thoughts on this current situation.
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer.
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Reader Comments (Page 1 of 1)
8-25-2008 @ 2:22PM
Gooby said...
Hell no. Look at the number that were foreclosures. The problems have only just begun.
8-25-2008 @ 2:58PM
Marty said...
Large investment funds , some of the same ones that jacked up the oil prices are out buying groups of properties from banks and that is skewing the figures.
Things remain down , and loans are harder to come by. People are even having a hard time getting a pre-approval letter!!!!
Marty