Housing market slow to recover
June 23, 2009
The National Association of Realtors today reported existing home sales for the month of May rose a mere 2.4% for the month of May, but were at their highest level since October of 2008. The national median sale price is now $173,000, representing a 16% drop in value in the last twelve months. The market has received a boost from the governments $8,000 tax rebate for first time home buyers and record low mortgage rates.
The housing market will likely face additional challenges for the balance of 2009. The historically low mortgage rates the market benefitted from in early March, have now moved up by almost one full percent. Real estate agents have also indicated that buyers are struggling to meet all of the new underwriting criteria and lenders have further tightened their appraisal requirements.
The housing market has been decimated by the foreclosure crisis, which continues to grow without a meaningful solution. Home foreclosures have been increasing almost every month of 2009, as the housing market closely tracks the challenges within the U.S. employment sector. The job market has recorded over six million of job losses in the last eighteen months and without a solution to fix the employment markets, it is hard to picture a solution for the housing markets. The west coast continues to be the area that is under the most pressure. Markets such as Arizona and California are seeing home values decline in the 30-40% range from prior 2008 levels. The number of home owners who are choosing to simply walk away from their home is continuing to increase. Many home owners are choosing to rebuild their credit, rather then have the financial burden of a mortgage that is in excess of 50% of a homes current value. Home foreclosures and bank owned homes are typically sold at 20-40% lower prices than comparable properties in a community. The government loan modification and refinance programs have done little to slow down the number of homeowners moving into foreclosure.
The NAR still believes that home sales will top the five million unit mark for 2009. Taking away some additional good news from today’s report, home inventories dropped an additional 4% last month. Eliminating the excess inventory and the recent jump with fixed mortgage rates will likely push some home buyers back into the market over the summer. The housing market will continue to be closely followed by economists and consumers as everyone is trying to find the markets bottom.
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