Housing Sales Take A Breather,  Still Up Over Previous Year  

U.S. home prices have risen two months in a row, says the Federal Housing Finance Agency, overseer of Fannie Mae and Freddie Mac, to 0.3% in July 2009 over June, and an adjusted 0.1% in June over April.

For the 12 months ending in July, U.S. prices fell 4.2%, a vast improvement over the 15.1% year-over-year loss calculated by the National Association of REALTORS® in June.

Echoing the trend is the Case-Shiller Index, which found that home prices in its 20-city index rose by 1.6% in July, compared to June, the third monthly increase in a row.  The Index of 20 cities found that prices from July 2008 to July 2009 were down 13.3% year over year.

Optimism over housing elevated with a report from the Commerce Department that August new home starts (a record of construction beginnings) rose 1.5% to an annual rate of 598,000. Building permits rose 2.7% to 579,000. Both figures marked the highest numbers since November 2008. 

Affordability drives sales volume

The National Association of REALTORS® reports that pending sales contracts signed in July increased for the sixth month in a row, largely due to affordability and federal and state incentives.

However, home sales volumes flagged for the first time in four months in August, due largely to two reasons - lender pipelines at capacity and renewed fears of job loss, yet the 2.7% decline was still the second-fastest sales pace since the recession began in December 2007. Housing sales were due for a breather, up 15.2% in four months.

The retreat was all the more notable as mortgage interest rates dipped to 5.19 percent in August from 5.22 percent in July. A year ago, the rate was 6.48 percent in August 2008.

Fortunately, total housing inventory fell 10.8% in August to an 8.5-month supply from a 9.3-month supply in July. Unsold inventory totals are down 16.4 percent from a year ago.

“Nationally, the typical mortgage payment now takes less than 25 percent of a middle-income family’s monthly income to buy a median priced home, with payment percentages so far in 2009 being the lowest on record dating back to 197,” explains Lawrence Yun, chief economist for the NAR.

Yun says he expects sales volume to continue at a brisk pace throughout the fourth quarter, as long as the tax credits to first-time home buyers remain in effect.

The median price of homes for sale is down to $177,700 as of August, 12.5% lower than a year ago.  

Jobs on deck

Meanwhile, the Bureau of Labor Statistics indicated a jobless rate of 9.7%, which grew to 9.8% in September, suggesting that job losses are continuing. In the 10 years since 1999, the nation has lost 223,000 net jobs while the population has grown by 33.5 million people.

On September 20, 2009, President Obama said on national television that he believes the economy is improving but that job creation could move slowly, a sentiment echoed by Fed Chief Ben Bernanke that 150,000 jobs must be created monthly just to keep up with population growth. 

Like a caboose, job gains always bring up the rear in a recovery. The Fed predicts that unemployment will reach 10% by the end of 2009, but that’s still less than the 10.8% unemployment experienced in 1982’s recession.

California Leads Housing Sales Rebound

Home sales volume increased 12 percent in July in California compared with the same period a year ago, says the California Association of REALTORS®.

Irresistible affordability and the help of the federal and state tax incentives created demand. Year-over-year, sales prices declined in the sate by 19.6%, to a median of $285,480 from $355,000 a year ago in July. 

As the tax credit draws to an end, sales are increasing. Month-to-month sales in July 2009 increased 8.1 percent compared to June, and media prices rose 3.9% compared to June’s median of $274,740.  

“July marked the fifth consecutive month of month-to-month increases in the median price,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “This was the largest increase on record for the month of July based on statistics dating back to 1979. The yearly decline in July also was the smallest in the past 19 months.”

Bay Area - DataQuick

Echoing the national sales retreat in August, Bay Area home sales fell month-over-month from July 2009, yet remained higher than a year ago for the 12th consecutive month, says MDA DataQuick in San Diego.

As consumers took advantage of government incentives, entry-level homes took center stage. While sales volume was down 14.3% in August from July, the sales trends was 4% higher than a year ago in the nine-county bay area.

With 9,886 sales closed, the Greater Bay Area as defined by DataQuick is in a fairly normal market, as judged between volume lows set in 1992 (6,688 units) and volume highs set in 2004 (13,940.)  Among the reasons for lower sales, is a smaller inventory of distressed properties, says the data research center as well as seller’s markets in some price ranges.

“Part of the mid-summer pause in the market could have been caused by home shoppers becoming frustrated by market conditions they didn’t anticipate. In many areas there were fewer homes, especially cheap foreclosures, to choose from, and lots of talk about multiple offers and all-cash deals. It might have driven some back to the sidelines,” said John Walsh, MDA DataQuick president, in a statement.

“At the same time, people are still concerned about job security, and about how many foreclosures might yet hit the market,” he said. “There are ongoing reports of mortgage delinquencies rising, yet the number of homes being foreclosed on has trended down lately. It’s bred a lot of uncertainty among the pundits and the public about how many more foreclosures are coming, when they’ll hit, and what impact they’ll have on prices.”

Home prices also fell, to a median of $360,000, says Dataquick, down 8.9 percent from $395,000 in July and down 19.5 percent from $447,000 in August 2008.  The reason is the influx of sales from lower cost inland areas as first-time home buyers and bargain hunters take advantage of affordable prices.

Greater Bay Area Prices Pick Up In September

By the end of September, the market was changing, with reports for single-family homes and condominiums showing an overall upward trend, according to multiple listings service data from MLS Listings Inc.

MLS Listings Inc defines single-family homes as detached single, attached single, or other, as long as there are no common property interests. Condominiums are defined as condos, townhomes, or other residences with common property interests.

Housing sales volumes tend to be cyclical, which is why monthly and yearly trends are included. The following information is not seasonally adjusted.

Single-family homes

The median price of existing single-family increased to $515,000 in September 2009, up 2.9% from the month before in August, and up 2.0% year-over-year from September 2008. 

Sales volume in September 2009 decreased 0.7% from August 2009, with 2,152 housing units sold for the month. Year-over-year, sales volume was up 5.1% from September 2008.

Condominium homes

Condominium prices decreased in September to a median of $333,000, down 4.6% for the month from 2009. September sales volume increased 2.5% over August with 575 housing units sold.

Year-over-year, September 2009 condo prices were 12.5% lower than in September 2008. Meanwhile, sales volume steadily increased, 24.5% for the same period.