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Thursday, September 4, 2008

Real change in direction or just grasping at straws?

From a recent real estate news feed comes this story about a surprising increase in home sales in the month of July. This just might be the turn in the numbers we've been waiting for; or it could be a one month anomaly. We’ll have to wait and see if the August numbers continue the trend. I certainly welcome any good news in the current market.

Resales of existing houses jumped by 3.1 percent in last month to the highest level in nearly half a year. On top of that -- and to the near total surprise of Wall Street analysts -- new home sales also rose 2.4 percent, according to the Commerce Department.

Resales were up almost everywhere: Up 9.7 percent in the Western states, up 6 percent in the Northeast, one percent in the Midwest. Only the south saw a slight decline -- one half of one percent.

New home sales showed a similar pattern: Up an amazing 39 percent in the Northeast, 10 percent in the West, 8.2 percent in the Midwest and down by 2.5 percent in the South.

Now, in fairness, before we get too enthusiastic about these sales gains, let's be frank about what's pushing this trend: The large numbers of short sales and foreclosures in many once-booming markets are cutting prices to the bone. In my little market area foreclosure sales crept back up to about 50% of the sales for August – see the Market Statistics page on my site for details on that.

But rock bottom prices are also bringing in a flood of first time buyers, fence-sitters and investors who've been waiting for hard, statistical evidence that the cycle is flattening out.
Keep this in mind too: The July resale numbers represent transactions closed before the passage of the new $7,500 federal tax credit. When the impact of the credit begins kicking in during the coming several months, you can bank on even higher sales numbers ... and a turnaround in prices. There is still a ton of foreclosed house on the market and the deals on them have never been better.

In other key economic developments this week: Mortgage applications rose nationally for both conventional and FHA loans to buy houses. Interest rates dropped for the third straight week -- hitting an average 6.44 percent for 30 year fixed rate loans and 5.94 percent for 15 years.

Also the federal government's monthly survey of home prices in more than three hundred markets around the country found that’ although the national average of prices was down slightly, prices rose in 20 states … and are up year to year in 30 of the 50 states. Locally I’ve seen the average for home sales creep up the last 2-3 weeks, with the median staying fairly constant.

So has the market started to rebound in Michigan? I certainly hope so. In the mean time, hand me a straw will you., I need something to hold on to.

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