2009 Home Sales Up, But Values Down
Real estate sales reached nearly 5.2 million in 2009, up 4.9 percent from 2008 according to the National Association of Realtors. The increase was the first annual rise since 2005.
In terms of prices, NAR says for all of 2009, the median price for a single-family existing home was $173,200, down 11.9 percent from 2008. This compares with a 2008 price drop of 9.3 percent.
Translation: Existing home values actually fell more in 2009 than in 2008, though prices did rise 1.4 percent in December 2009 when compared with a year earlier.
Inventory
“Total housing inventory at the end of December,” says NAR, “fell 6.6 percent to 3.29 million existing homes available for sale, which represents a 7.2-month supply at the current sales pace, up from a 6.5-month supply in November. Raw unsold inventory is 11.1 percent below a year ago, is at the lowest level since March 2006, and is 28.2 percent below the record of 4.58 million in July 2008.”
It Could Have Been Worse
The obvious saving grace of 2009 was the introduction of a real tax credit for first-time homebuyers. The “credit” introduced in 2008 under the Bush Administration was actually an interest-free loan that had to be repaid to Uncle Sam. The 2009 version under the Obama Administration was an outright tax credit of up to $8,000 for buyers and $6,500 for homesellers. It’s not a loan of any sort and there’s nothing to pay back for those who qualify. Look here for tax-credit specifics.
There’s no doubt that the tax credit for first-time homebuyers boosted sales. The worry is this: What happens when the credit ends, supposedly for contracts made before the end of April. Will the market.
NAR says “distressed homes, which accounted for 32 percent of sales last month, continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes in the same area.”
If it’s true that distressed homes downwardly distort the market, then is it not also true that first-time homebuyer and existing home seller credits upwardly distort the marketplace? What about foreclosure moratoriums which kept homes off the foreclosure rolls? How about the government’s Make Home Affordable program which has delayed hundreds of thousands of foreclosures and saved a number of homes with new financing? And interest rates below 5%? Surely that’s an upward distortion….
Looking Toward 2010
What about 2010? Given the continuing steep rates of unemployment, massive numbers of option ARMs that will be re-cast this year and next, and huge numbers of unsold foreclosures — that shadow inventory which has been in the news — look for both tax credits to be extended and high rates of foreclosure to continue during the coming year.
As to prices, for what it’s worth, I expect to see more metro areas with rising prices in 2010, areas outside such major foreclosure centers as California, Florida, Arizona, Nevada, Michigan, Georgia, Ohio, Texas, and Illinois.
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