Existing Home Sales

calculatorExisting Home Sales for March
Sales of existing homes were UP 3.03% in January 2007 when compared to December, which is good news for everyone who has been worrying about the home sector of the economy. Compared to January 2006, though, sales were down by 4.30%. Always keep in mind that the housing market of 2005 was powered by rampant and “exuberant” speculation.

Sales Pace by Region
For month to month comparisons, sales were up by 5.6% in the West, 4.79% in the Midwest, 2.01% in the South, and flat in the Northeast. Compared to last year at this time, sales are down everywhere except the Northeast, which showed an increase of 5.94%. Sales were down by 9.59% in the West, 7.30% in the South, and .65% in the Midwest.

Inventory Trend Flattens
At the current sales pace, it would take 6.6 months to sell all homes currently on the market. We’re hoping to see a continued slide in inventory as that will help diminish any potential for sliding values.

Price Appreciation
Nationally, the median average sales price feel by 3.13% from last year to a median average price of $210,600. Prices declined 1.21% in the Northeast, 1.69% in the South, 3.5% in the Midwest, and 4.57% in the West. It is important to note that many real estate agents are reporting price stability in their local markets, though it is yet uncertain what effect the crisis in sub-prime lending may have over the upcoming year.

Obsession with Sub-Prime Lending Crisis
The great majority of homebuyers obtain an “A-Paper” mortgage to buy their home. In some areas, “sub-prime” and “Alt-A” lending accelerated. This isn’t necessarily due to more borrowers with bad credit, but because qualifying is easier on these loans since they offer lower down payments with “no-doc” qualifying. This means fewer buyers have to document their incomes and savings in order to qualify for the purchase. Many of those sub-prime loans, especially ones originated in the last two years, have begun to default. A portion of the defaults occur because the buyers actually couldn’t afford to make the payments (which is why they were getting “no-qualifying” loans in the first place). In addition, some of the loans were fraudulent. Sellers were coming up with straw buyers to purchase the home at an inflated price just so they could get money out of the property, and those borrowers never intended to make ANY payment on the loans. Even though this occurred on a minority of loans, it could have a cascading affect that ripples through the housing industry, but mostly in higher priced areas- not everywhere. This ripple could occur because some homeowners will be looking to refinance as adjustable rates begin to ratchet up, causing increases in mortgage payment amounts. Many of those borrowers will look to refinance. The problem occurs because prices were artificially inflated for a variety of reasons, one of which is the fraudulent sellers and buyers who looked to unload properties. As lenders wise up, they will look more critically at higher priced appraisals. Still, sub-prime loans are only a fraction of all the loans out there. Then, only a fraction of sub-prime loans are defaulting. What we are saying is that this minority of loans MAY have a bigger impact on values than one would from the small volume — and that this effect will mostly be confined to higher value properties.

Median Average
The median average is the “midpoint” sales price. Half the home were sold above that price and half below.

Home Sales Pace Defined
We report on the annual sales pace. What that means is that the National Association of Realtors calculates how many homes were sold, makes adjustments for seasonal factors like weather, school, vacations, and calculates how many homes would sell in a year at that given pace. All figures in this report are for January closings. February figures will be released near the end of March.

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