Existing Home Sales Rebound

MBA (8/26/2008 ) Velz, Orawin
Total existing home sales rose by 3.1 percent in July to a seasonally-adjusted annualized rate of 5.0 million, rebounding from a record low in June. June’s sales pace had been the slowest of total existing home sales since the inception of the series in January 1999.
On an unadjusted basis, sales fell between June and July as they normally do, but since the decline was smaller than those in recent years, the seasonally adjusted numbers showed an increase. Since November 2007, total existing home sales have been in a narrow range of 4.8 million units to 5.1 million units.

Sales continued to decline significantly from the same period last year, however. Sales of single-family homes during the first seven months of this year were down 16.6 percent from those during the same period last year. The year-to-date decline has been worse for condo sales, with sales 23.6 percent lower than those last year.

Existing home sales increased in three regions, led by a 9.7 percent jump in the West, the fifth consecutive monthly increase. Sales also rose in the Northeast and the Midwest by 5.9 percent and 0.9 percent, respectively. The South posted a slight decline of 0.5 percent.

Foreclosure or distressed sales, which accounted for as much as a third to 40 percent of the national market last month, according to the National Association of Realtors, helped support sales in the West over the past several months. The West has experienced the highest foreclosure rate and suffered the largest price decline in the nation, as foreclosed homes are usually sold at a deep discount. While the median price for total existing homes for the nation fell 7.1 percent in July from a year ago, the decline in the West was 22.2 percent—the largest on the record. Since February, the region has posted double-digit year-over-year home price declines.

Bargain prices have helped lure buyers back into the market, however. While the year-over-year price drop has accelerated since February, the year-over-year drop in sales has moderated. July marked the first month since October 2005 that the West has posted a year-over-year increase in sales. All other regions continued to show double-digit declines in home sales from a year ago.

Other data corroborated the strong activities induced by rising distressed sales in the West. For example, according to a report by DataQuick released on August 18, home sales in Southern California increased 16.7 percent in July from June and 13.8 percent from last July. July’s sales were up from a year ago level for the first since September 2005. Foreclosure sales accounted for 43.6 percent of Southern California existing home sales in July, helping to push down the median home price 31.1 percent lower than a year ago level.

For the nation, the number of total homes available for sale was up 3.9 percent in July from June, solely a result of a 29.2 percent surge in the number of condos for sale. (The data are not seasonally-adjusted.) A stronger sales pace and a flat inventory pushed down the months’ supply of existing single-family homes to 10.6 months in July from 11.1 months in June. The huge jump in the number of condos for sale pushed up the months’ supply to 15.1 months, despite the increase in sales pace.