Existing-home sales rebound to 2-year high
Saturday, October 24, 2009
Existing-home sales climbed 9.4 percent in September to their highest level in more than two years, fueled by demand for cheap properties and an $8,000 tax credit for first-time buyers, according to industry data released Friday.
Sales of existing homes, including condos and single-family residences, reached an annual rate of 5.57 million units in September, their highest level since July 2007, according to the National Association of Realtors. The monthly increase was the largest on records that date back to 1999 and was far better than analysts had expected. Sales were up 9.2 percent from the same period a year ago.
This is the latest sign that the housing market has begun to rebound, if only temporarily, as buyers take advantage of record-low mortgage rates and pounce on cheap foreclosed properties, analysts said. Sales have increased five of the last six months and rose throughout the country last month. In the South, which includes the Washington region, sales rose 9 percent last month. Also, the inventory of homes on the market shrank again, though analysts said it needs to come down more. It would take 7.8 months to sell all of the homes on the market at the current rate.
"The supply of used homes for sale is also steadily declining, an encouraging trend," said Mike Larson, a real estate analyst at Weiss Research, a research firm.
But analysts said the market rebound may be temporary. An $8,000 tax credit for first-time home buyers expires Nov. 30, and sales will likely flatten or fall in the following months, analysts said. The tax credit generated temporary demand as buyers who otherwise may have waited to buy a house rushed to cash in before the credit vanished, analysts said.
"The tax credit simply shifted sales from 2010 to 2009," said Patrick Newport, an economist for IHS Global Insight.
Industry lobbyists are pushing Congress to extend the program. Without it, they say, the sales momentum created over the last few months could be derailed before the housing sector can make a substantial recovery.
But the credit would have to be expanded, such as raising the income limits of eligible buyers or increasing the credit's value, for it to have an appreciable impact, Newport said. "If they just extend it, it would not increase the pool that much," he said.
In the meantime, the housing market remains weak and prices continue to decline, analysts said. The national median existing-home price fell to $174,900 in September, down 8.5 percent from the same time last year, according to the Realtors. Sales prices fell the most in the West, 15 percent, but the South saw a 7.6 percent decline.
That is a smaller price drop than in previous months, reinforcing hopes that home prices may be starting to stabilize, said Lawrence Yun, the Realtors' chief economist. "It's a positive momentum, but whether we have a firm stabilization is unclear," he said.
But recent price stabilization in some parts of the country may be temporary, some analysts said. Rising unemployment will push more borrowers into foreclosure and ultimately dump more homes on the market, dragging down prices again, they said.