Washington Bank Owned Foreclosure Homes REO BLOG

According to the National Association of Realtors, existing-home sales have made a strong rebound in September with first-time home buyers driving much of the activity, marking five gains in the past six months.

Existing –homes sales which include single-family, townhomes, condominiums, and co-ops lead the charge jumping 9.4 percent. Sales activity in this sector is at the highest level in more than two years, since July 2007.

National Association of Realtors chief economist, Lawrence Yun, said “favorable conditions matched with a tax credit are boosting home sales. Much of the momentum is from people responding to the first-time buyer tax credit, which is freeing many sellers to make a trade and buy another home,” he said. “We are hopeful the tax credit will be extended and possibly expanded to more buyers, at least through the middle of next year, because the rising sales momentum needs to continue for a few additional quarters until we reach a point of a self-sustaining recovery.”

Even with the improvement, Yun said the market is underperforming. “Despite spectacular gains in the stock market, principally from the financial sector recovery, most of the 75 million home-owning families have more wealth tied to their homes. Home values could soon turn consistently positive and help the broad base of middle-class families, but we are not there yet,” he said.

Why the need to continue and expand the tax credit contrary to what some in Washington seem to think?

The breakdown of homes sales show that first-time home buyers lead the charge and accounted for 45 percent of home sales during the past year. Currently the $8,000 tax credit is available for those that make under $75,000 a year as an individual, $150,000 jointly and have not owned a home in the past three years. By expanding the tax credit to those that earn less than $150,000 a year as an individual, $300,000 jointly it will allow more families to benefit from the current conditions and have incentive to do so. Along with helping more families to benefit from the current conditions it will also help to reduce the current inventory of homes on the market which is still hovering around close to 8 percent.

NAR President Charles McMillan said affordability conditions remain historically high. “Potential first-time buyers can take heart in that affordability conditions this year are the highest on record dating back to 1970, but with the first-time buyer tax credit scheduled to expire at the end of next month, people could hold back from entering the market,” he said. “Our read is that housing overshot on the downside because homes are selling for less than replacement construction costs in much of the country, and the home price-to-income ratio has fallen below the historical average.”

Total housing inventory at the end of September fell 7.5 percent which represents an 7.8-month supply at the current sales pace, down from an 9.3-month supply in August. Unsold inventory totals are 15.0 percent below a year ago.

“The current housing supply is the lowest we’ve seen in two and a half years,” Yun said. “If we could continue to absorb inventory at this pace, home prices would return to normal, modest appreciation patterns next year.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 5.06 percent in September from 5.19 percent in August; the rate was 6.04 percent in September 2008.

The national median existing-home price for all housing types was $174,900 in September, which is 8.5 percent lower than September 2008. Distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes in the same area.

Single-family home sales rose 9.4 percent in September and are 7.7 percent above the level in September 2008. The median existing single-family home price was $174,900 in September, which is 8.1 percent below a year ago.

Existing condominium and co-op sales jumped 9.7 percent in September and are 9.7 percent above the pace a year ago. The median existing condo price was $175,100 in September, down 11.7 percent from September 2008