Friday, October 24, 2008

Existing Home Sales Rise 5.5%

A bit of good news on a bleak day for the market.  Home resales rose to a 5.18 million annual rate, a 5.5% increase from August's unrevised 4.91 million pace, according to the NAR.  The median home price declined to $191,600, down 9% from $210,500 a year ago and $203,100 from August this year.  Inventories of homes fell 1.6% at the end of September to 4.27 million, representing a 9.9 month supply, down from a 10.6 month supply at the end of August.  Sales jumped 16.8% in the West, mostly due to brisk activity from foreclosures.  As I mentioned yesterday, a high level of activity from foreclosure sales indicates that prices in the West are potentially nearing a bottom.  Home prices in parts of California are down an astonishing 50% from obviously unsustainable levels that were not supported by incomes.  As home prices drop, affordability returns to the market, and buyers who previously could not afford to buy a home are now in the market.  Investors are also looking for opportunities to pick up properties where the rental income may provide a nice return.  As I've mentioned before, the only solution to our housing crisis is the return of affordability to the market.  If prices drop low enough where owning is attractive again, and financing is available to buyers with decent credit, and the economy manages to avoid a severe and protracted recession, then perhaps things might be looking up for the housing market.  Unfortunately there are alot of "ifs" and "ands" in that sentence.  

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