Existing Home Sales Drop At Fastest Rate In 18 Years
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The two most closely watched monthly housing reports came
out this week and served only to muddy the real estate waters even further.
On Tuesday the National Association of Realtors issued its report on existing
home sales for the month of March. It wasn't pretty. Total existing-home
sales, including single-family, townhouses, condos and co-ops fell 8.4 percent
from a seasonally adjusted rate of 6.68 million in February to 6.12 million
units in March. This is the sharpest decline since January 1989 and brought
sales numbers to the lowest level since mid-2004. The sales pace was 11.3 percent
below the 6.90 million sales recorded in March of last year.
NAR spokesman, Chief Economist David Lereah placed most of the blame
on the weather, saying that he had expected the hit on March sales because of
the unusually bad winter weather in February which kept people off the house-hunting
trail. However, "looking at overall activity in the first quarter, we see that
existing home sales averaged 6.41 million - a figure that is moderately higher
than the sales pace during the second half of 2006. We also may be seeing some
losses as a result of the subprime fallout. However, this is masking improved
fundamentals in the housing market, with lower mortgage interest rates and motivated
sellers."
Lereah said it was too early to measure the impact of tighter lending standards
which he expects to moderately dampen housing activity, but "we're
still looking for existing-home sales to gradually improve during the last half
of 2007."
There is currently an inventory of 3,745,000 existing homes for sale. At the
current sales rate this is sufficient to supply the market for 7.3 months. This
is an increase of 7.4 percent over the 6.8 months inventory in revised February
2007 figures and a 30.4 percent increase over the inventory in March, 2006.
Prices also declined year over year, dropping 0.3 percent from March 2006 when
the median was $217,600 to $217,000 last month. (Analysts say that month to
month comparisons are useless but the median price was up from $213,600 in February
to $217,000 in March)
Data on the sales of new homes was a little more encouraging.
According to data jointly released on Wednesday by the U.S. Census Bureau and
the Department of Housing and Urban Development new homes in March sold at an
annualized pace of 858,000 units. This is 2.6 percent above the revised February
figure of 836,000 but is 23.5 percent below the March 2006 estimate of 1,121,000.
It is worth noting that the estimates for both February and January had to
be downgraded significantly as final figures came in. February dropped from
848,000 to the aforementioned 836,000. January new home sales were originally
estimated at 937,000 but were changed to 882,000 in the next month's report.
Inventories also dropped a bit. There is currently a backlog of 7.8 months
supply at current absorption rates as compared to 8.1 months in February. The
actual numbers of homes for sale barely changed - increasing from 544,000
to 545,000; the inventory decrease was based entirely on the up tick in sales.
One year ago there was a 6.1 months supply of homes on the market.
Both median and average prices for new homes increased during
March. The median price was $254,000 compared to $251,800 in February. The average
sales price went from $326,000 to $330,900.
New home sales figures probably didn't have as much influence on the
market as did some excellent earnings reports but still the stock mark soared
on Wednesday with the Dow closing above 13,000 for the first time in history.
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