The National Association of Realtors announced this past Monday that sales of existing homes rose in February year-over-year-- 2.8 percent for single family homes and 3.7 percent for condominiums. Total sales hit 5.03 million units, though Wall Street economists had predicted another DECLINE to a consensus estimate of around 4.8 million units. This is fresh evidence that the housing cycle may finally be bottoming out after nearly three years of correction. Breaking the 5 million mark is pretty good, given where we are in the overall economy. Locally, anecdotal indicators have been indicating a pick-up in business over the last 30-460 days, with many more buyers out looking. Many are snapping up foreclosed properties as soon as they hit the “dump it” price with the banks.
In fairness, the latest sales gains were accompanied by a decline in the national median price of homes sold -- down by 8.2 percent from year-earlier numbers. While that is not good news, it does indicate that prices have adjusted and we are on our way to selling off the huge inventory that built up in the market. Not all of that decline in the Median sold price was from foreclosure value loss. There's another factor at work pulling down the national median number: Relatively more houses are selling in places like Texas, North Carolina and Utah, where prices are moderate and affordable, while there are relatively fewer sales in ultra-high-cost California. In Michigan, the lower priced “starter houses” have remained an active market all along and are also selling well. So the median price may be lower, but it's not just because home values across the country are crashing. The mix is different, so the median price is a lower number.
Low-cost mortgage money is also definitely helping to fire up sales. Average 30-year rates declined to 5.875 percent (National average) last week -- and any time mortgage money is under 6 percent, you're going to see more home buying. The changes to the FHA, Fannie Mae and Freddie Mac lending limits helped too, as we have reported before. A good percentage of Michigan’s “sweet spot,” pricing-wise is now within the FHA limits and all of the “Sweet spot” is within the limits of the other two organizations. I define that “sweet spot” as the $200-400,000 range. And remember that Fannie and Freddie borrowers may be required to have 10-20% down, but FHA borrowers can still do 3% down and get the great rate, too.
So let's take our good news about sales and interest rates … and look to better days as the Spring buying season kicks off. I’m showing houses to lots of buyers right now, so I see the increase in activity. And more and more of them are actually making offers, which is really a good thing. Maybe the little ray of sunshine has finally broken through and better days are ahead. I certainly cling to that hope.