Eye On Housing
Existing home sales increased to the highest level of the year, having posted gains for five of the last six months, despite weakness among first-time buyers. Existing home sales increased 2.4% in September, but remain 1.7% below the same period a year ago. The National Association of Realtors (NAR) reported September 2014 total existing home sales at a seasonally adjusted rate of 5.17 million units combined for single-family homes, townhomes, condominiums and co-ops, up from 5.05 million units in August.
Three regions increased in September, ranging from 7.1% in the West to 1.5% in the Northeast. Only the Midwest declined in September with sales declining 5.6%. Year-over-year, the South was up 1.4%; the remaining three regions declined year-over-year, ranging from 1.4% in the Northeast to 4.9% in the Midwest. Seasonally adjusted condominium and co-op sales increased by 5.2% and were unchanged from the same period a year ago.
The first-time buyer share remained unchanged from the previous two months at 29%, far behind the historical average first-time buyer share of about 40%. Tight lending conditions continue to buffet first-time buyers despite reports of easing standards, and a full recovery awaits their return.
Total housing inventory decreased 1.3% in September to 2.30 million existing homes. At the current sales rate, the September 2014 inventory represents a 5.3-month supply, down from a 5.5-month level the previous month. NAR also reported that the September typical time on the market was 56 days, compared to 53 days in August and 50 days during the same period a year ago. NAR reported that 35% of homes sold in September were on the market less than a month, compared to 40% the previous two months.
The September distressed sales share increased to 10%, following two months below 10% for the first time since October 2008. Distressed sales are defined as foreclosures and short sales sold at deep discounts. September all cash sales increased to 24% from 23% in August, but were down from 33% during the same period a year ago. Individual investors purchased a 14% share in September, up from 12% in August, but down from a 19% in September 2013. Some 63% of September investors paid cash, compared to 64% in August and 69% the previous two months. The continued withdrawal of cash investors will create more opportunity for first-time buyers.
The median sales price decreased for the third consecutive month in September to $209,700 compared to downwardly revised $218,400 in August. However, the September median sales price was 5.6% above the same period, and September represented the 31st consecutive month of year-over-year price increases. The median condominium/co-op price decreased to $205,200 from a downwardly revised $212,800 in August, but is up 3.2% from the same period a year ago.
Although the Pending Home Sales Index decreased a slight 1.0% in August, the positive momentum in existing sales from the very slow start at the beginning of the year continued in September, and is expected to continue through the year. The one weak spot remains with the first-time buyer segment.
Is it tight lending policies or the higher up-front costs of buying a first home that is keeping more than 25% of potential first-time buyers out of the market? The up-front costs have always been the problem and I believe that continues to be the case. How increasing down payment and mortgage insurance premiums, eliminating down payment assistance, reducing seller paid closing costs is suppose to help the real estate market in the long term is beyond me. When is the industry going to do something about it? Will we wait until interest rates double?
Has anyone stopped to think what sales would look like if the missing 27% of first-time buyers were back into the market? What you are seeing are the results of a housing policy that has made it progressively much harder to buy a first home since 2008.