Home sales rebound to early-2007 level
Tuesday, November 24, 2009
Economists and policymakers got what they were looking for Monday: a clear uptick in the housing market. The catch is, few believe it's sustainable.
The National Association of Realtors reported that sales of existing single-family homes, townhomes and condominiums in October surged to a seasonally adjusted annual rate of 6.1 million units from 5.54 million in September -- making last month the strongest since February 2007. Sales were up 23.5 percent from last October.
Every piece of housing data is scrutinized these days because it was primarily the housing market that derailed the U.S. economy, and its recovery is key to restoring economic vitality.
Low home prices, federal programs that helped push down interest rates and a temporary $8,000 federal tax credit mostly for first-time buyers have all played a role in boosting home sales in recent months. As sales picked up, the excess supply of homes started shrinking and prices began stabilizing.
But real doubts linger about whether these gains can be maintained, especially if unemployment continues to rise and government intervention is curtailed. The federal "cash for clunkers" program boosted auto sales, for instance, but only temporarily. And many economists forecast weak growth once the government's broader economic stimulus spending winds down.
On Tuesday, Federal Reserve leaders are expected to project continued high levels for the unemployment rate through at least 2011 when the Fed releases its forecast for future economic growth.
"The number one worry is the labor market," said Adam York, an economist at Wells Fargo Securities. "We're still losing jobs at a pretty hefty clip. . . . Without income, no one's going to be buying a house or anything else."
On Monday, the Realtors group singled out the tax credit for the surprisingly strong October sales. That credit was due to expire Nov. 30 and buyers rushed to get in under the wire. It was recently extended to April 30 and expanded to include repeat buyers, who will be eligible for a $6,500 refund starting Dec. 1.
Monday's report showed that every region in the country experienced an increase in sales, led by the Midwest, where sales rose 14.4 percent. The South, which includes the Washington region, had a 12.7 percent increase, followed by the Northeast at 11.6 percent and the West at 1.6 percent.
Nationally, sales have risen in six of the past seven months, with August the sole exception.
"Were the October numbers goosed by people thinking the home buyers' tax credit will go away? Yes," said Thomas Lawler, an economist and housing consultant. "Is it likely we'll see one more very strong home-sales number in November? Yes. . . . But is it sustainable? Probably not."
Even Lawrence Yun, the Realtors group's chief economist, conceded that a sharp rise in October and November sales cannot hold in the coming months.