Sun State Savings

The mar­ket for home resales stays strong.

Despite sparse home inven­tory, the National Asso­ci­a­tion of REALTORS® reports that 4.59 mil­lion exist­ing homes were sold in Feb­ru­ary on a seasonally-adjusted, annu­al­ized basis. An “exist­ing home” is a home that can­not be clas­si­fied as new construction.

Last month’s sales data rep­re­sents a 9 per­cent improve­ment from the year prior.

There are now just 2.43 mil­lion homes for sale nation­wide — a 19% reduc­tion ver­sus a year ago. The com­plete home inven­tory would “sell out” in 6.4 months at the cur­rent sales pace.

Some ana­lysts believe that a 6-month home sup­ply indi­cates a hous­ing mar­ket in balance.

The real estate trade group’s report con­tained other note­wor­thy sta­tis­tics, too :

1. 32 per­cent of home sales were made to first-time buyers
2. 33 per­cent of home sales were made with cash (i.e. no mortgage)
3. 34 per­cent of home sales were of fore­closed homes or homes in short sale

In addi­tion, nearly one-third of all home sales “failed” last month, the result of homes not apprais­ing at the pur­chase price; or, the buyer’s inabil­ity to secure mort­gage financ­ing; or, insurmountable home inspec­tion issues.

Even account­ing for last month’s high con­tract fail­ure rate,though,  the Exist­ing Home Sales report still posted its second-highest read­ing since May 2010. For today’s home buyer, the data may be a “buy signal”.

As com­pared to last fall, home sup­plies are down and home sales are up. Basic eco­nom­ics tell us that home prices should start to rise shortly — if they haven’t already. After all, the Exist­ing Home Sales data is 30 days old, report­ing on Feb­ru­ary. It’s nearly April today.

The good news is that homes remain afford­able. With con­form­ing and FHA mort­gage rates in the low-4 per­cent range, home afford­abil­ity is at its high­est in history. Home prices may rise this spring, but at least your mort­gage pay­ment should remain low.

January’s home resales moved to a 20-month high — addi­tional evi­dence that the nation’s hous­ing recov­ery is underway.

Accord­ing to the National Asso­ci­a­tion of REALTORS®, the Jan­u­ary 2012 Exist­ing Home Sales showed 4.57 mil­lion units sold last month on a seasonally-adjusted, annu­al­ized basis — a 4 per­cent increase as com­pared to December’s revised figures.

An “exist­ing home” is one that’s been pre­vi­ously occu­pied and can­not be cat­e­go­rized as new construction.

Beyond the head­line num­bers, though, there was plenty about which for today’s home sell­ers to get excited. Demand for homes remains strong, fore­shad­ow­ing higher home prices through 2012.

First, the national hous­ing stock is at a 5-year low.

In Jan­u­ary, the num­ber of homes for sale nation­wide slipped to 2.31 mil­lion, the small­est home inven­tory since Feb­ru­ary 2007, and a 21% decrease from just one year ago.

Falling home sup­ply amid con­stant home demand leads home prices higher. At the cur­rent pace of sales, today’s com­plete home inven­tory would “sell out” in 6.1 months. 

Ana­lysts say that a 6-month sup­ply is a mar­ket in bal­ance. Any­thing less is Bull Mar­ket territory.

Sec­ond, the National Asso­ci­a­tion of REALTORS® says that one-third of all homes under con­tract “failed” last month. This means that many more buy­ers tried to buy, but couldn’t for a num­ber of rea­sons includ­ing mort­gage denials; or, insur­mount­able home inspec­tions issues; or, homes apprais­ing for less than the con­tract price.

As con­tract fail­ures sub­side, Exist­ing Home Sales are expected to rise even faster.

And, lastly, first-time buy­ers con­tinue to power the home resale mar­ket. In Jan­u­ary, 33% of all sales were made to first-time buy­ers, up four points from last year. This sta­tis­tic sug­gests that renters are mov­ing into home­own­er­ship, an impor­tant com­po­nent in a sus­tained hous­ing mar­ket recovery.  

Given high demand and shrink­ing sup­ply, we should expect for home prices to rise in the com­ing months, if they haven’t already. Thankfully, mort­gage rates remain near all-time lows.

Low mort­gage rates make homes more affordable.