Sales of existing homes rose in July, surpassing expectations, as buyers snapped up deeply discounted properties in parts of the country hit hardest by the housing bust.
However, the number of unsold properties also hit an all-time high, the latest indication that the worst housing slump in decades is far from over. Prices nationwide are not expected to hit bottom until early next year.
The National Association of Realtors reported Monday that sales rose 3.1 percent to a seasonally adjusted annual rate of 5 million units, down from June's downwardly revised rate of 4.85 million units. Sales had been expected to rise by only 1.6 percent, according to economists surveyed by Thomson/IFR.
"The process of a recovery has begun," said Joel Naroff, president of Naroff Economic Advisers. "It's not going to be short and swift, but it's begun nonetheless."
Home sales were about 13 percent lower than a year ago and prices were down dramatically. The median price for a home sold in July dropped to $212,000, down by 7.1 percent from a year ago.
Despite the third monthly sales increase this year, the number of unsold single-family homes and condominiums rose to 4.67 million, the highest number since 1968, when the Realtors group started tracking the data. That represented a 11.2-month supply at the July sales pace, matching the all-time high set in April. Until the inventory level is reduced to more normal levels, analysts say, the housing slump is likely to persist. The inventory level is being driven higher by a massive wave of mortgage foreclosures.
Between 33 and 40 percent of sales activity is coming from foreclosures or other distressed properties, estimated Lawrence Yun, chief economist at the Realtors group. While buyers are pouncing on lower prices — especially in places like California, Florida and Nevada — sales are sluggish in formerly stable states like Texas.
One key unknown for the U.S. housing market is the future ability of mortgage finance companies Fannie Mae and Freddie Mac to supply money for loans. The two government-sponsored companies have dramatically cut back the availability of mortgages as they cope with mounting losses from foreclosures. Even with government help, nearly 2.8 million U.S. households will either face foreclosure, turn over their homes to their lender or sell the properties for less than their mortgage's value by the end of next year, predicts Moody's Economy.com.
Locally, I track a little market area on a weekly basis, which includes Milford (Village and Township) and Highland, Commerce, White Lake and West Bloomfield Townships. In that market there has been a trend lately of the inventory decreasing on the lower end (under $300K) and increasing on the upper end, with both ends stretching out a bit on the time that it takes to sell. For the last month or so the medians for listed and sold houses has been creeping up, and the percentage of foreclosed homes in the mix has been going down.
You can see all of the statistics that I track by going to http://www.themilfordteam.com/ and clicking on Market Statistics. What I think I’m seeing is more “normal” home sales – homes that are not in foreclosure or distress. Just in the last month of so I’ve finally started to see homes above $500K start to sell again, albeit mostly lakefront homes, but still a good sign. I’m still showing lots of foreclosed houses and my buyers are still asking to see them first, before they look at normal homes. Most normal sellers have also had time to internalize what has happened to property values and have moved to get their home prices in line with the market as it exists. They may not be overly happy, but at least they have gotten real about what they will likely get for their houses.
So, are we there yet, are we there yet – have we reached the bottom? Not yet, but we may have started to flatten out near the bottom or maybe we just hit a little ledge on our way into the abyss. At least locally I prefer to see that little ray of sunshine.