Monday, February 25, 2008

Existing Home Sales Report: January 2008

Today, the National Association of Realtors (NAR) released their Existing Home Sales Report for January again confirming, perfectly clearly, the tremendous weakness in the demand of existing residential real estate with both single family homes and condos declining uniformly across the nation’s housing markets.

Although this continued and even worsening falloff in demand is mostly as a result of the momentous and ongoing structural changes that are taking place in the credit-mortgage markets, consumer sentiment surveys are now indicating that consumers are materially feeling the current recessionary trend which will likely result in even further significant sales declines to come.

Furthermore, we are now seeing solid declines to the median sales price for both single family homes and condos across virtually every region with the most notable being a decline of 7.2% to the single family home sales price in the West.

In the obvious face of home sales not “hovering in a narrow range”, NAR senior economist Lawrence Yun is now suggesting that the recent “bailout” actions by the federal government will serve to boost home sales “steadily higher” later this year.

“Subprime loans and other risky mortgage products have virtually disappeared from the marketplace, and over the past five months, this has been reflected in soft but fairly stable home sales, … As the increased limits for FHA and conventional loans are implemented, more buyers will have access to safer FHA loans and lower interest rate loans in high-cost areas, which could lead to steadily higher home sales later in the year.”

NAR president Richard Gaylord as usual, makes another wishful attempt to suggest that pent up demand will soon fuel increasing sales.

“Keep in mind the biggest slowdown in home sales last year was in high-cost markets, which were hard-hit by the credit crunch and notably higher interest rates for jumbo loans, but relief is on the way, … Once buyers have greater access to higher loan limits, it will take a few months for increased shopping activity to translate into higher sales, … We should see some movement of pent-up demand by this summer, but higher loan limits need to be implemented fully and promptly to have maximum benefit.”

In reality, the latest report provides, yet again, truly stark and total confirmation that the nation’s housing markets are declining dramatically with EVERY region showing significant double digit declines to sales of BOTH single family homes and condos as well as large increases to inventory and a continued explosion in monthly supply as a result of the collapsing pace of sales.

Keep in mind that these declines are coming “on the back” of TWO SOLID YEARS of dramatic declines further indicating that the housing markets are truly in the process of a tremendous correction.

The following (click for larger versions) are charts showing sales for single family homes, plotted monthly, for 2006, 2007 and 2008 as well as national existing home inventory and month supply.

Below is a chart consolidating all the year-over-year changes reported by NAR in their January 2008 report.