Today's Timeout for a Twist of Optimism is that the housing market is showing a very modest uptick. Coming straight from the NAR (National Association of Realtors)
Existing-home sales – including single-family, townhomes, condominiums and co-ops – increased 2.0 percent to a seasonally adjusted annual rate 1 of 4.99 million units in May from a level of 4.89 million in April, but are 15.9 percent below the 5.93 million-unit pace in May 2007.Now although existing home sales are actually down 16 percent from May 2007, I still feel like this is very good news. We don't want home sales to be what they were in May 2007. If they were, then the prices would still be through the roof, and we would be waiting for an even bigger bubble to pop. The housing markets need some stability, so that would be buyers can feel secure about finally taking the leap.
More from the NAR President, Richard Gaylord:
“Home buyers are starting to get off the fence and into the market, drawn by drops in home prices in many areas and armed with greater access to affordable mortgages,” he said. “Today’s buyer plans to stay in a home for 10 years, which is a good strategy for building long-term wealth.”What we do need to look out for however, is how many of these houses being sold are foreclosures vs. "real" sales. I found that "About one-third of total sales last month were 'short sales' that reflected foreclosures or distressed properties." This is something to be cautious about. Still, after recently attending 2 auctions for foreclosed houses in the LA area, I came away very surprised.
I was surprised at the huge interest in picking up these foreclosed homes, and I was surprised at the prices that they sold for. Surprised because they were too expensive for my taste! They were selling for maybe 10% or less off of market value. Note that when people buy these auctioned homes, they are not allowed to actually look inside the houses (at least the two auctions that I went to.) So taking out the extra risk associated with buying a house and not knowing what's on the inside, these investors didn't actually save much money--if any at all.
This only leads me to agree with Mr. Gaylord. It really seems like there are hordes of people waiting on the sidelines simply because they're afraid of the market. They want to buy, but are afraid that the worst hasn't come yet, and don't know enough about the markets to try to predict when it will come.
For those of you hard-core economists here is the full Existing Home Sales chart provided by the NAR:
Chart
Here is the link to the NAR's housing statistics homepage:
http://www.realtor.org/research/research/ehspage
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