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Falling Prices Spur Rise in Home Sales
April saw a rise in home resales in the US, the second jump in the last 3 months, as foreclosed listings and lower prices in general attracted bargain shoppers and investors. As a result, some analysts are proclaiming the end may be near for the slumping real estate market.
According to a report from the National Association of Realtors(NAR), home resales jumped nearly 3% to an annual rate of 4.7 million, which is on par with projections, from 4.55 million in March. The median sales price was down 16% from last year, the second largest year to year drop ever. The freefall of home values did show signs of slowing during the first quarter.
This rise in the rate of home sales will help to deplete the huge inventory of unsold homes on the market and thus steady home prices. These are vital steps to a recovery in housing construction and the economy coming back from the worst recession we've seen in over 50 years.
The stock market lost ground, despite rising early as a result of the NAR report, largely due to a rise in interest rates caused by economists' fear that record high sales of government debt will overwhelm demand.
The S & P 500 closed almost 2% lower at 893 pts. Treasury notes also dropped, with the yield on a 10 year note going from 3.55% to 3.3% yesterday. The 10 year Treasury is commonly used as a benchmark for interest rates.
The average US home price fell 7% during the first quarter, a slower decline than the 8.3% drop in 2008's final quarter, the largest on record. An official with the Federal Housing Finance Agency said that there is sufficient data to believe the housing market may be stabilizing in various parts of the country.
45% of existing home sales were distressed properties, according to the NAR report. Economists had predicted a 2% increase in sales, to an annual rate of 4.65 million. The projected number is the median of 72 projections in a Bloomberg News Survey.
Sales are still 3.5% lower than a year ago. Homeowners attempting to lower monthly payments have been hurt recently by rising interest rates. New applications for home financing declined by almost 15% last week, as refinancing options diminish. However, the Mortgage Bankers Association's purchase measure did rise slightly, proof that rates are still low enough to prompt sales.
The number of homes listed for sale rose nearly 9% in April, to almost 4 million, a typical rise in the Spring. At today's pace of sales, it would take a little over 10 months to deplete the inventory, up from 9.5 months at March's pace. Resales of single family dwellings jumped 2.5% to an annual rate of 4.17 million, while sales of condos and co-ops jumped 6.5% to a rate of 500,000.
Last month's increase was spurred by the 12% rise in the Northeast, and 3.6% jump in the West. Sales rose slightly in the South and declined in the Midwest. April was the second month in a row that set a record for foreclosure filings as the nation's unemployment rate grew to its highest level in more than 25 years. Foreclosures were a whopping 31% higher than in April of last year.
The percentage of home sales represented by distressed properties fell in April, a reflection of typical seasonal volatility. The percentage of home sales going to first time buyers was about 39%, also down from March.
One economist cautions that it is an unusual market, as the market is being impacted by the huge numbers of distressed property listings, while there is little activity in the area of higher priced homes.
Foreclosure listings are commonly seeing upwards of 35 bids apiece, while home listed at $750k and higher are sitting on the market for longer than three years, on the average. One possible reason is that providers of larger loans are charging higher interest rates. The President's Administration instituted an $8,000 tax credit for first time buyers who close by Nov. 30.
Lower interest rates are also contributing to a rise in home affordability. The rate of a 30 year fixed rate loan dropped under 4.8% in April, the lowest its been since 1972, when Freddie Mac began tracking it. Rates have fallen, in part, because of the Federal Reserve buying up mortgage-backed securities.
Marin Real Estate Blog
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