Think back to November, 2008. The U.S. was wrestling with the choice between John McCain and Barack Obama. The government was bailing out AIG, again. And the real estate market was grinding to a halt as the world absorbed the ramifications of the financial collapse.
With that in mind, the jubilation over the latest U.S. sales numbers seems a tad misplaced. The National Association of Realtors today announced "another big gain in existing home sales," with the number of transactions jumping 44.1 jump from a year earlier, which is impressive. But not when the comparison is to a month when the industry was on the verge of Armageddon.
The level of sales transactions is certainly good news, representing a 7.4 increase from October and the highest levels since Feb. 2007, NAR notes in its press release. But they also show a market that is still in crisis, with 33 percent of sales involving distressed properties.
Beyond the bottom feeders, most agree that the volume was driven by tax breaks, which were expected to end in November, but have been extended into next year. Fifty-one percent of the buyers in November were first-time buyers, presumably taking advantage of the tax credit, NAR reports.
“This clearly is a rush of first-time buyers not wanting to miss out on the tax credit, but there are many more potential buyers who can enter the market in the months ahead,” said NAR economist Lawrence Yun.
A market driven by short-lived tax breaks and distressed sales is hardly cause for celebration. What happens when the tax breaks dry up and there are no short sales left? The median price for an existing home was down 4.3 percent from last November’s dismal level, according to NAR, which would be cause for panic in a normal market.
Nevertheless, dig down deeper and the latest report offers some level of hope for the market. Most importantly, inventory levels are dropping, down 1.3 percent in November, with a manageable 6.5-month supply. Of course, it’s possible many homeowners are simply not trying to sell their homes in this market. But the inventory levels indicate the business may be returning to something resembling normal levels.
For example, inventory levels in Miami-Dade County have dropped a whopping 41 percent in the last 15 months. In Miami, they are cheering that the median sales price for a single-family home dropped “only” 18 percent from a year earlier, thanks to a 4 percent bump in the last month.
Statewide, the median house price in Florida has dropped 12 percent, to $139,000, in the last year, and condo prices are down 21 percent, to a median price of $104,400.
In normal times, that might have industry executives jumping off bridges. But these days, it’s good news.
"Things are stabilizing," Trulia c.e.o. Pete Flint told the Associated Press. "There is a significant amount of buyer interest out there.”
In other words, the big news may not be signs of recovery, only that the worst is over.
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