Existing home sales were up just 0.4% with inventories being
reported as the blame. The National Association of Realtors
said sales increased to a seasonally adjusted annual rate of 4.92
million (4.9 million was consensus estimate) in January from 4.9
million revised in December (December existing home sales were
initially reported at 4.94 million units).
This month's reading was less than stellar, but it appears that
inventories may be the issue here; inventories across the U.S. fell
4.9%, or 25% year-on-year, to 1.74 million, which is the lowest
since Dec. 1999.
Several reports have noted that realtors are actually pressing
the home builders to build. I guess the sector didn't
get that memo when it dropped 10% yesterday.
The inventory question can be attributed to both cheap
properties for sale being gobbled up by investors for rental
property or appreciation and to the average rent rate itself, which
has skyrocketed over the last 5 years.
Remember that it's been both tough and undesirable for many
Americans to get a mortgage (rent offers flexibility in uncertain
times), but as some rents in major metro areas exceed the cost of
ownership, many have begun the hunt for homes, only to find limited
What's even more interesting is that the median sales price rose
12.9% to $173,600 over the past year, marking the 11th straight
month of year-on-year gains according to the NAAR. This huge
jump in prices is due to the shift in quality of homes being sold
and further supports the lack of less expensive inventory
A year ago, there was still a large amount of cheap foreclosures
lingering; today the bulk of the inventory and sales are happening
on the higher end of the scale.
Zillow said that 2 million people came out from being under
water on their homes in 2012, due mostly to organic home
appreciation. But don't let that number fool you; there are
still 14 million people upside-down on their mortgages and over $1
trillion in mortgage loans on those homes.
All and all I'd say we are headed in the right direction.
Housing values were up almost 6% in 2012, but are only expected to
increase 3.2% in 2013 according to Zillow.
Then you have reports from companies like Toll Brothers that
missed both revenue and earnings that also add a question mark.
If America is really dying for new home inventory, then why the
softness in housing starts reported this week?
One would also think housing starts would be abnormally high to
replace those lost by Hurricane Sandy.
If builders were to add too much inventory, I would have to
argue that prices would suffer as well as the space is still
The housing market is getting stronger, but wonder where we will
be 18 months from now, after the sequester, slowing GDP growth and
interest rates on the rise. There are also a plethora of
multi-family units developed over the last 2 years and currently
being built which may convert to condo once rents start to fall and
rates begin their accent; this will have a negative effect on
How much do you think the average home in America will
appreciate (net total) come January 2015?
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