February Existing Home Sales Fell 23.8%

Monday's fictional headline, via The Onion, National Association of Realtors: "Sales of existing homes increased in February and remain within a fairly stable range."

Why is this fictional? Changes from January to February are measuring seasonal differences, not actual improvements. Year over year changes showed that single family home sales were 23.8% below February 2007 levels.

The national median sales price was also a big surprise, freefalling down 8.2%.

Single-family home sales decreased 22.9%, while the median existing single-family home price was $193,900 in February, down 8.7% from year ago prices.

The best news in the release was the 3% decrease in total housing inventory. At the end of February, there were 4.03 million homes for sale -- a 9.6 9.9-month supply.

~~~

UPDATE: The math in the NAR report is incorrect -- inventory is not 9.6 months, it's 9.9 months (thanks, CR!)

graphic courtesy of Barron's Econoday

Source:
Existing Home Sales Rise In February
National Association of Realtors, March 24, 2008

Comments

[Scorpio69er]

Someone pointed out that February had 29 days this year -- thus a 3.4% increase in the number of days in the month! Neat trick!

[whidbey]

The home sales are just one end of the tunnel, new home construction (the other end) is further down, almost 70%, with few prospects of reassuming growth of any description for many years. The consequences of this collaspe/drop in about 22% of the demand side of the US economy has yet to settle in the life style of America. It will be very uncomfortable for most citizens to discover that a generational change, not just an interlude, has taken place. We are suddenly poorer than anyone thought possible just a year ago.

[thegugg]

I don't think that anyone is jumping for joy on this news, but lets not always compare to the previous year, maybe a weight average of good and bad years. It is crazy to measure against years that were out of whack anyway. Clearly 2003, 2004, 2005 and 2006 were years of extraordinary gains; not only in dollar volume, but in units sold as well. The inventory is different problem all together, its the hangover from the exuberence. Probably will erode any pricing power for sellers, till we wash out the bad and the ugly.

[MattBlackman]

I never cease to be amazed by the seemly endless surge of optimism whenever either existing or new home sales temporarily turn up. As head NAR home sales promoter Lawrence Yun has quietly admitted, year-over-year changes are a far more reliable indicator since month-over-month numbers are subject to a number of vagaries and seasonal fluctuations.

As it turns out, the 2.9% monthly increase in Feb was due to a rapid growth in foreclosed properties hitting the market and the resulting drop in prices bringing bargain hunters out in droves.

Previously moribund real estate capital, sales in Motor City jumped an impressive 48% in the first two months of the year which may seem like good news but it is important to point out that prices have fallen 54% there according to the Detroit Board of Realtors thanks in a large part to rising foreclosures.

To put the increase into perspective nationwide, foreclosed properties for sale represent one-in-nine homes on the market up from one-in-15 a year earlier and this ratio is sure to rise. Nevertheless, the month-over-month sales increase prompted a number of bullish analysts to again declare a bottom in the housing market in sight.

Sure, let's celebrate each time we get some good property news but it is important to not lose sight of the forest for the trees. Y-o-Y existing home sales are down 15% and median prices have fallen 14.3% in just seven month since putting in a second peak in July 2007 (see Chart 4 at tradesystemguru.com/co.../ ). As of the latest data the median price of an existing home sank to $195,900 in February.

According to a March 24 article in the Wall Street Journal, prices might need to fall much further. A recent Credit Suisse report projects that average home prices have another 40% to fall in the Miami metropolitan area, 36% in Phoenix, 26% in Los Angeles and 20% in Las Vegas if they are to become more in line with income levels.

Matt Blackman - TradeSystemGuru.com

[MattBlackman]

By the way Barrie, think your 9.9 months supply is wrong. 4,030,000 / 5,030,000 = 0.801 years X 12 months/year = 9.614 months isn't it?

[WAKEUP]

Look on the bright side: Maybe the wordsmiths at the NAR can write fantasy/romance novels, once the dust from the housing collapse settles. Real estate agents and brokers will certainly have plenty of time to work on their first draft, and the second, and the third, and . . .