Housing Market Bounces

As the news today that housing resales dropped in August sent stocks spiraling downwards, those within the real estate industry were faced with a really interesting reality. The housing market rebound may not be as linear as once hoped.

Existing home sales fell 2.7% in August after a record increase of 7.2% electrified the industry in July. However, there are many factors that likely played into the change. The federal tax credit of $8,000 for new home buyers is due to expire soon, likely contributing to the glut of deals in July. Jobless rates continue to be high, as do foreclosures. With many foreclosures yet to hit the market (likely knocking home prices down), it seems reasonable to think that the market may not climb steadily, but rather peak and valley as it restarts.

This may just mean that government programs and incentives (such as the tax credit) are important to getting consumers back in the market, and that sellers may just need to watch timing to match the ups and downs of the market. Even when home sales increase, the inventory of houses on the market is still high and unlikely to dissipate rapidly. But sellers can likely work within the curves of the market to best optimize when to sell their home (and at what price).

Finally, the coming winter means that it’s unsurprising that home sales will dwindle. Home sales generally increase during the spring and summer, with the warmer temperatures. Sales will probably decrease as fall changes to winter.

New Housing Starts See Unexpected Jump in June

More people are starting to build new homes again, or at least, that’s what the numbers from the unexpected rise in housing starts in June appear to show. The number of housing starts rose 3.6% (or about 20,000 seasonally adjusted starts) to 582,000 units. Even larger leaps were seen in the number of housing starts of single family homes (14.4%) and the number of permits to break ground (8.7%). Analysts had expected these values to remain unchanged from previous months.

While the number of housing starts and permits to break ground are still down around 50% from a year ago, the increase is still a sign of progress. It seems that few aspects of the real estate industry have defied analyst’s expectations recently, and the large unexpected jumps are a definite exception. Although one wonders slightly whether developers will be able to fill all their new properties, it is good to see people building homes again. Perhaps once the new properties are completed, the worst of the recession will be over.

Existing Home Sales Rise As Prices Fall

Existing home sales rose in May according to a report released to day by the National Association of Realtors. The level of 4.77 million homes is a 2.4% increase from an adjusted 4.66 million homes in April. However, it remains 3.6% below last year’s levels. The increase in homes sold is attributed this time to many returning buyers, who are gravitating towards existing home sales rather than distressed properties. Distressed sales fell to 33% of the sales in May, versus 45% of the sales in April. Yet the median home price, of $173,000 is still down 16.8% from a year earlier.

In other words, first time home buyers tend to gravitate towards homes in foreclosure, due to the lower prices. Yet these sales drag down the home values in the neighborhood, as we have discussed before. Return buyers, on the other hand, are less likely to buy a home in foreclosure. Their increasing market share appears to be good for the housing market as a whole, yet the steady decline of housing prices continues to have the real estate industry concerned.