Ahh, To Be a First-Time Homebuyer
What’s behind the uptick in existing and new home sales? Dropping down the credit crisis rabbit hole of the last four weeks has had a little bit of an Alice-in-Wonderland feel to it. Nothing is as you expected it would be.
Confounding expectations, existing home sales increased in September by 5.5%, the National Association of Realtors (NAR) reported Friday. The turnaround reflects a modest increase in the sale of existing single-family homes and condos compared to August sales, according to NAR.
And the U.S. Census Bureau’s monthly report shows that sales of new construction also rose in September, by 2.7% compared to August.
Must be good news, right? Well, sort of. Because while home sales increased, the national median sales price for existing homes fell 9% in September from a year ago. A year ago, foreclosures made up a relatively small share of sales, but distressed sales now represent 35 to 40% of sales transactions, says NAR, so you can blame these foreclosed properties, which usually sell at a discount, for dragging down the median sales price.
As for the rise in new home sales, well, let’s put that in perspective. New home sales rose 2.7% from a month earlier, but they’re still 33% lower than they were a year ago. Builders are moving inventory by sheer force of will, slashing prices and using a wide assortment of gimmicks and incentives to attract bargain-hunting buyers, including everything from free upgrades to a free Disneyland vacation.
Total housing inventory remains high, with a 9.9-month supply in existing homes at the end of September, down from a 10.6-month supply in August. New construction properties have about a 10.4-month inventory.
Still, most economists don’t expect the heightened sales activity to continue in 2008, since most of September’s sales occurred before the economic crisis fully unfolded late in the month. It’s clear we still have a ways to go before the housing market works out all the bad loan kinks.
