December 21, 2011
Housing market weaker than previously thought
Sales of previously occupied homes rose last month. But the National Association of Realtors says it overstated about 3 million sales during and after the Great Recession, showing the housing market remains much weaker than previously thought.
The private trade group said Wednesday that sales rose 4 percent last month to a seasonally adjusted annual rate of 4.42 million. That's below the roughly 6 million homes a year that economists say are consistent with a healthy housing market. But it's ahead of 2008's revised sales, now considered the worst in 13 years.
The nearly 4.2 million homes sold last year are far fewer than the nearly 7.1 million sold at the peak of the housing boom in 2005. This year is on pace to be slightly ahead of last year's total of about 4.25 million.
The trade group revised its sales from 2007 to 2010 down 14 percent, from more than 20.6 million to nearly 17.7 million. Among the reasons for the lower figures, the Realtors group says: changes in the way the Census Bureau collects data, population shifts and some sales being counted twice.
More than two years after the recession officially ended, many people can't qualify for loans or meet higher down-payment requirements. Even those with excellent credit and stable jobs are holding off because they fear that home prices will keep falling. Sales are also being hurt by a decline in first-time buyers, who are critical to reviving the housing market.
The new figures show that sales fell in three of the past four years since the housing market began to drop in 2006. Declining prices and record-low mortgage rates haven't been enough to boost sales.
The changing numbers could affect how economists view the trade group's data. It could also affect companies that use the figures for hiring and expansion plans.
Sales are measured when buyers close on homes. But many deals are collapsing before that point. One third of Realtors say they've had at least one contract scuttled in November and October, up from 18 percent in September.
Contracts have been canceled for any of several reasons: Banks have declined mortgage applications; home inspectors have found problems; appraisals showed a home was worth less than the bid; a buyer lost a job before the closing.
The median sales price rose 2.1 percent to $164,200 in November.
The high rate of foreclosures has made resold homes much cheaper than new homes. The median price of a new home is roughly 30 percent higher than the price of one that's been occupied before twice the normal markup.
Investors are taking advantage of the discounts. Their purchases made up 19 percent of all sales last month, compared with fewer than 10 percent in healthier housing markets.
Sales rose across the country. They increased on a seasonal basis by nearly 10 percent in the Northeast, 4.3 percent in the Midwest, 3.6 percent in the West and 2.4 percent in the South.
The glut of unsold homes declined in November to 2.58 million homes. At last month's sales pace, it would take seven months to clear those homes. Analysts say a healthy supply can be cleared in six months.