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By all measures the housing market is improving. Last month we saw a 7.4% surge in existing home sales in November. 6.54 million units were sold, compared with 6.09 million in October. Analysts had expected sales to come in at 6.25 million.
Much of the increase came from government incentives for first time home buyers. A tax credit of $8,000.00 was extended into next year. A second incentive of $6,500.00 was added for homeowners who lived in their homes for five years and are willing to relocate.
About half of all sales came from buyers who used these incentives, an estimated 2 million units. Next year, 2.4 million buyers are expected to use these tax credits.
Housing is bottoming out as evidenced by the slower rate of decline in prices. The National Association of Realtors reported that prices fell 4.3% in November to a median price of $172,600. This was the slowest rate of decline since 2007.
Nevertheless, the inventory of unsold homes is still high with 3.5 million units still on the market. This amounts to a 6.5 months supply. So far, buyers are aware of this "buyers market" and are not rushing in to snap up any deals.
Do you believe that home prices will rise next year?
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Reader Comments (Page 1 of 1)
12-22-2009 @ 5:03PM
jj said...
I notice many for lease or rent signs everywhere in town. Could this be a signal of something in the industry. Where is everyone?
12-22-2009 @ 8:13PM
william lindblad said...
As goes the saying one size fits all - the stats provided by the NAR does the same. In short, their stats are worthless.
One has to keep in mind that they use the word "sale" in the context of "signed contract". This is a problem as even in the "boom" times of 2005, many of these so called "sales" never culminated in a "closing". P.T. Barnum used verbal slight of hand in which the majority of his victims found amusing. This is not what gets reported by the NAR and it is sure not factual, nor amusing.
Homes prices in general are likely to remain somewhat static. Some areas will have small incremental increases, while others will continue to decline. In general, the decline factor will remain as this market was terribly inflated in the first place. Under a common sense rule home prices have to remain in line with wages. You cannot have a housing market priced at extremes in which the dwellings can never be paid for. It's a major detriment and Japan is a good example. They had to create 40 years notes to counter high prices but comparing an island nation with little available property to the U.S. is apples and oranges. While we have an expanding population, we still have abundant land. We just don't have jobs and until that situation is corrected, real estate is going to remain static no matter what the government does.
There is also the matter of many,many notes either in, or near default?
When Congress finishes with health and jobs, they have the energy bill as in Cap & trade. In it's present form it will kill the housing market. What is in it is admirable in intent, but the timing is poor. To add 15 to 20 thousand to all new construction when the economy is primarily being supported by government stimulus - totally foolhardy.
Buying homebuilders might be a bad move for the investor.
12-23-2009 @ 5:02AM
al coholic said...
You are right about the NAR, William. They are nothing more than blatant cheerleaders and possess zero credability.
I don't think the government can fix the housing issue by wasting more money on rebates it doesn't even have to give. In the end the distortions will work themselves out as the potential buyers recover financially and supply and demand get back in line.
In answer to your question, Connie, home prices could go up a smidgeon, but probably only properties that are in that sweet place known as "location, location, location."