January 20, 2012

Existing Home Sales Up as Investors Shore Market

January 20, 2012

Existing Home Sales Up as Investors Shore Market

December 2011 Existing Home Sales–National Association of Realtors
-Existing Home Sales were 4,610,000 (seasonally adjusted annual rate)
-Previous was 4,420,000
-Month/Month +5.0%
-Year/Year +3.6%
-For all of 2011, existing home sales rose 1.7% to 4,260,000 from 4,190,000 in 2010
-This stat measures closed deals on single family homes, condos, townhomes, and co-ops

All cash transactions were 31% of the market. The issue may be that many foreclosures are in condition not up the FNMA lending standards. Distressed sales were 32% of the market. 21% of the sales were to investors.

This trend is healthy because it is only investors buying homes they will fix and rent who can provide the buying capacity to absorb the present supply (which was down to 6.2 months from 7.2 months at the end of November) as well as the shadow inventory of distressed sales which will be created by foreclosures this year. The folks who buy, repair and rent out these homes are helping stabilize values and also creating cash flow for themselves which will be a plus for the economy.

I do not see this as a story indicating that the housing market is in significant recovery. It is, however, a necessary step to recovery. It also shows that recovery is accomplished by letting the market work rather that by taxpayer funded incentives which add to an already massive national debt.

Also notable: 33% of Realtors reported cancelled deals in December, same as November and up from 9% in December 2010. This is a very high number that the NAR says is:

caused largely by declined mortgage applications and failures in loan underwriting from appraised values coming in below the negotiated price.

That and jittery buyers. Here’s an on-the-ground perspective of why this is happening.

And finally, a reminder that last month, the NAR cut 2007-2010 existing home sales by 14.3%.

Below are revisions for each year, and here’s the full revisions report.

Further Reference:
NAR December Existing Home Sales Report
33% Of Existing Home Sales Not Closing. True From Where I Sit
NAR Cuts 2007-2010 Existing Home Sales 14.3%

by Dick Lepre & Julian Hebron