Existing homes selling fast - record fast

The volume of home re-sales has been on the upswing for four consecutive months.

By Les Christie, CNNMoney.com staff writer

Last Updated: August 21, 2009: 11:17 AM ET

NEW YORK (CNNMoney.com) -- Sales of existing homes rose in July for the fourth consecutive month, lending support to economists who argue a recovery is near.

Sales of previously owned single-family homes were up 7.2% compared with June and 5% from July 2008, The National Association of Realtors (NAR) reported Friday. The monthly gain was the largest on record for existing-home sales, which NAR has tracked since 1999.

"The housing market has decisively turned for the better," said Lawrence Yun, NAR's chief economist. "A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales."

July home sales hit an annualized rate of 5.24 million proprieties, marking the first breach of the 5 million annualized rate mark since last September, when they hit 5.1 million. Since then, they have stayed in a very narrow range, bouncing between between January's low of 4.49 million and October's high of 4.94 million.

The July performance far exceeded expectations: A consensus of real estate experts had forecast sales of 5 million.

Low prices

Of course, homes should be selling. Prices have fallen more than 32% from their peaks, set in the summer of 2006. Plus, mortgage rates near historic lows makes the cost of purchasing a home lower than they've been in nearly 20 years.

"In some recovering markets like San Diego, Las Vegas, Phoenix and Orlando, the demand for foreclosed and lower priced homes has spiked, and a lack of inventory is becoming a common complaint," Yun said.

Overall though, the national inventory rose by more than 7% to 4.09 million units. That will continue to keep prices low, according to Mike Larson, a housing analyst with Weiss Research.

"There's a bifurcation of the market," he said. "There's excess supply putting downward pressure on prices and people respond to the lower prices by buying homes."

Housing is its most affordable in many years, he pointed out. "Falling prices is not part of the problem, they're part of the solution," he said.

Hurting home sales have been stubborn increases in job losses. More than 6.7 million jobs have been lost since the beginning of 2008.

That's one reason why Robert Dye, a senior economist for PNC Financial Services (PNC, Fortune 500), is keeping his optimism in check.

"I wouldn't go overboard on this number," he said. "The economy is still healing and will continue to run into some bumps. But it does bode very well for the future and shows buyer confidence is increasing."

There is one potential bump, however: The looming end of the first-time homebuyers credit. The credit gave first-time homebuyers an up to $8,000 refund on their taxes if they close on a deal before Dec. 1. That credit has been motivating buyers, and when it expires, demand could dry up.

"Just like with the cash-for-clunkers program, we run the risk of a letdown as the program runs its course," Dye said.

Where homes are selling

Regionally, the strongest market was the Northeast, where sales soared by 13.4% to an annualized rate of 930,000. That was 3.3% higher than last July. The median price of homes sold during the month was $236,700, off 15% from last year.

Midwest sales rose 10.9% to a 1.22 million rate, 8% higher year-over-year. Prices there have sunk 5.9% over the past 12 months to a median of $157,200.

In the South, sales were up 7.1% from June and 5.4% from last July to a rate of 1.95 million. Price have dropped 7.1% to $164,500 over the past 12 months.

The only region reporting a slip in sales was the West, where they fell 1.7% to a rate of 1.13 million. That was ahead of last July, however, by 1.8%. The median price there was $202,300, a whopping 28% below what is was a year ago.

First Published: August 21, 2009: 10:19 AM ET

Short Sales - What a Treat

The more I continue to work with short sales, the more I realize that they are always a house of cards. As agents we spend countless hours, weeks and months of hold time, and in the end have no control over what so ever. It's just a frustrating and often times helpless feeling. In this job, I'm looking for as much control as possible. I find that when I have my fingers on things, they seem to be done properly and on time. With short sales you have no control and are completely at their mercy.

Here are 2 examples I've had in the last 2 weeks. I have been working with a very highly qualified couple since March. We submitted our offer and were waiting for bank approval. Our offer is solid, near market price, and my buyers are barely even taking a loan out. After 4 months of negotiations back and forth, I find that the bank needed an updated form from the title company. The title company sent it back the next day and assumed all was well. However, all was not well. There was an extra letter in the e-mail address and the person that was supposed to get the paperwork did not get it. Instead of asking again for the paperwork, the bank simply closed the file and sent it back to the end of the line.

These poor buyers are distraught! They had been waiting for months on this and because of one typo, they are not sent back to square 1. I've been working with the listing agent and the negotiator in trying to get this resolved with no luck to this point. I'll have to keep you posted.

In my second scenario, I have 2 banks I'm dealing with. Luckily on this one, I'm the listing agent and thus have direct contact with the bank. I was able to get the 1st lender to sign off on the short sale, but the 2nd lender would not. They were asking for my client to come in with nearly $4000 when they had bank statements showing they he had no where near that. How can you expect someone to pay that kind of money at closing when they are already in dire financial straights. Finally, after about a week of wrestling they said they would accept $1000 and my seller is doing what he can. If this doesn't come through, they foreclosure will happen and most likely the 2nd will get nothing or next to nothing. I don't understand why they are playing this so tough when they have very little to stand on.

These are just a couple of examples I've had in the last 2 weeks. Unfortunately these seem to be the norm, and not exceptions. I guess this is why you have to work with someone that knows what they are doing and how the system works. If you ever have any questions feel free to call as I have dealt with all kinds of situations. If I don't have the answer, I can probably get it.

Good News on Housing

On Monday, July 27, the Commerce Department reported new home sales jumped 11% in June to a seasonally adjusted annual rate of 384,000 from an upwardly revised rate of 346,000 in May. It was the largest monthly increase in more than 8 years. Economists had expected a sales pace of 360,000 units.

The Standard & Poor’s / Case-Shiller 20-city housing price index dropped 17.1% from May 2008 to May 2009. However, there was a 0.5% increase in housing prices in May compared to the previous month. It was the first rise in the monthly index since July 2006.
The consumer confidence index fell to 46.6 in July from 49.3 in June. Economists had expected a slight decrease to 49. The index was benchmarked at 100 in 1985, a year chosen because it was neither a peak nor a trough in consumer confidence.

Orders for durable goods — items expected to last three or more years — fell 2.5% in June, the first decrease in three months. Economists had anticipated orders for durable goods would fall 0.6%. However, excluding automobiles and aircraft, durable goods actually rose a robust 1.1%, a much better performance than the flat reading economists had expected.

Initial claims for unemployment benefits rose by 25,000 to 584,000 in the week ending July 25. The figure was higher than the 575,000 that economists had forecast. The number of people continuing to claim jobless benefits in the week ending July 18 decreased by 54,000 to 6.197 million, the lowest level since April.

The Commerce Department announced that gross domestic product — the total output of goods and services produced in the U.S. — decreased at an annual rate of 1% in the second quarter of 2009. This follows a 6.4% decline in the first quarter of 2009. Economists had expected a slightly larger 1.5% decrease.Upcoming on the economic calendar are reports on construction spending on August 3, pending home sales on August 4 and factory orders on August 5.