Some good July home sale news with some caveats
Posted by nithi.vivatrat on August 21, 2009
Bloomberg reported this morning that July sales of existing homes exceeded the forecast to reach the highest level it has been in almost two years.
The Bloomberg News survey of 64 economists had a July median forecast of a 5 million annual rate. The actual sales in July, according to the National Association of Realtors, exceeded this forecast with a 5.24 million annual rate.
Of course, the number of transactions tends to increase as prices fall: the median price of existing homes fell 15%, from $210,100 in July 2008 to $178,400 in July 2009. There is no new concrete evidence of price stabilization, as the supply of previously-owned unsold homes, measured in months, remained unchanged from June at 9.4 months. To this point, I wrote in previous posts about the possible existence of “shadow inventory,” homes whose owners are waiting for signs of economic improvement before putting on the market, which would continue to keep inventory high (and prices depressed).
Other factors to keep in mind: the elevated level of foreclosure activity will likely persist for some time, which will continue to depress prices. In addition, the $8000 first-time homebuyer federal tax credit will not be available for transactions occurring after December 1; first-time homebuyers accounted for 30% of July sales, so the end of the program could also have a negative impact on home sale activity.
Some good news today, but I’m taking it with a grain of salt, given these other long-term factors.