Friday, October 23, 2009

Home Sales (Inventory) Highest (Lowest) In 2+ Yrs.

Highlights from today's report on existing home sales:

1. Existing-home sales – including single-family, townhomes, condominiums and co-ops – jumped 9.4% to a seasonally adjusted annual rate of 5.57 million units in September from a level of 5.10 million in August, and are 9.2% higher than the 5.10 million-unit pace in September 2008. Sales activity is at the highest level in over two years, since it hit 5.73 million in July 2007 (see top chart above).

2. The inventory of existing homes for sale in September fell to 3.63 million homes, the lowest level since January, and 642,000 units below last September's inventory of 4.272 million homes. At the current sales pace, there is now a 7.8 months supply of existing homes, which is the lowest level since March 2007, two and a half years ago (see top chart above). Compared to the peak of 11.3 months supply of inventory in April, September's 7.8 months supply represents a reduction of 3.5 months.

3. The median home price in September was $174,900, which was up by 6% from the January low of $164,800, but 8.5% below last September's $191,200 price, and $2,400 below the August level of $177,300.

Bottom Line: The national real estate market is gradually recovering, and the worst is definitely behind us.


At 10/23/2009 2:48 PM, Blogger KO said...

I happen to be looking for a new place right now. What seems to be happening in the Los Angeles area is the core area is holding up but outlying areas are still soft. My agent says every foreclosure and short sale gets multiple offers though. She had a foreclosure that got 28 offers earlier this year. Those take a while to close so they're mainly investors.

Here are some price changes from today (which have been all down lately except for one $3,000 increase this week):
1317 W Verdugo Ave, Burbank $470,900 (-$18,950)
10618 Woodbridge St #106, Toluca Lake $459,000 (-$180,000)
6212 Chimineas, Tarzana, $499,000 (-$100,000)

Burbank is where many studios are (NBC, Disney) and is also about 10 to 15 miles from downtown. About a half hour commute. Tarzana is far along what used to be the busiest freeway in the world, the 101. It's about an hour and a half commute from downtown.

At 10/23/2009 2:49 PM, Blogger marketdoc said...

I remember when we used to call this part of "the Business Cycle." In 1879, economist Henry George published his theory identifying the relationship between real estate and the business/economic cycle.

At 10/23/2009 5:34 PM, Anonymous Anonymous said...

How much of this home buying is real estate speculation -- my guess is a lot of it is.

At 10/23/2009 10:04 PM, Blogger Cabodog said...

Re: speculation. Properties are finally make sense on a cash-flow basis -- ie, the cap rate provides a reasonable rate of return that justifies ownership.

For many years, they only profit hope for landlords was appreciation and we now know the result of that foolish investing.

Real Estate will always be popular as an investment, as it can be easily understood by many (vs. complexity of stocks) and the fact that many people now distrust Wall Street enough to never consider owning stocks again.

With amateur investors usually flocking to real estate, prices should once again regain momentum simple due to its appeal to the masses.

At 10/24/2009 12:13 AM, Anonymous Anonymous said...

It's funny no one mentioned that the government is giving many people $8,000 to buy a house. The government is now beginning to investigate what could be as much as 10% fraud in the program. 4 year olds buying houses. People rebuying their current house and having the paper work back dated.

With the program ending and the buying season coming to an end I'd expect inventory to start increasing again.

At 10/24/2009 5:26 AM, Blogger marketdoc said...

Much of the activity in Florida is from cash buyers. Yes, the $8,000 tax credit scandal seems newsworthy but more the exception than the norm. Those who wanted to "wait for the bottom" (the speculators) are now watching prices rise without having done anything.

At 10/24/2009 11:12 AM, Blogger Bruce Hall said...

It is difficult to separate the anecdotal from the actual, but it seems that the "real estate market" is now comprised mainly of foreclosures/short sales. It will be awhile before properties that are not "financially distressed" will find their way back into the market.

Rather than accept 30-40% less for a house than 2-3 years ago, owners are opting out of the market. If the stock market can recover, so can the housing market. Of course, that presumes there is a real basis for recovery. Not here; not now.

At 10/24/2009 1:44 PM, Anonymous Anonymous said...

There is a few more years of interest only loans that will reset and it's anyone's guess whether or not these people can get refinanced.

I'm real happy in my little part of the planet. There is one renter on the street and most people put money down and went with fixed rate loans when they bought. The price of housing is the same now as it was before the bubble.

I don't know how much of the DJIA's recent gains is recovery. Some of the companies on the DJIA have cut closed door deals with the white house that make them better off. Others are being pumped full of cash by the Fed. Others could have gotten priced too low in the fire sale.

I'm inclined to watch dollars to metals and dollars to foreign currency. There are too many big central planners out there still playing with the market for it to settle down.

At 10/26/2009 1:19 AM, Anonymous fortich said...

Cabodog, you don't know what the hell you're talking about.

First, Cap rates are not calculated for single family residences. Multifamily property rents are plunging along with house rents and condo reversions. Even hotels are entering the residential rental market.

Second, cap rates for commercial real estate are rising across every property type in every market with extremely low transaction volumes.

Vacancy and availability rates are soaring and rents are plunging. There is absolutely no way anyone is doing cash flow investing right now. These speculators are equity investing at what appears to be a local minimum. Equity investors lease on a Triple Net basis which has lower rent than Full Service Gross, so they've likely got severe negative cash flow if they've even got tenants. How deep are those pockets?

Default rates are soaring across all property types in all markets. Financing for bridge loans has dried up and high cost transactions can't find financing either.

CRE price declines are catching up with house price declines. Anyone investing in this climate had better hope prices don't remain stagnant for the next five years, a likely possibility.


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