Sunday, January 06, 2008

A little good news

The perennial optimism of the National Association of Realtors is finally being rewarded with a little good news for buyers and sellers. Existing home sales rose slightly in November after months of declines, says NAR's latest monthly tally.

Chief economist Lawrence Yun says the upturn was due to the stabilization of markets in the wake of mortgage disruptions earlier in the year, but there could be other reasons -- homebuyers may simply be tired of being scared out of their wits by the national press. How long can anyone remain in a state of panic before they start to ignore the bombs and go on with daily life -- including buying a house?

Existing home sales have stayed in a narrow range following a near-20 percent plunge in September. While Yun says that suggests stability, he credits "near historic low interest rates" and "decelerating price declines, along with a modest reduction in the number of homes on the market." Actually, sales are even better than the NAR reports. Here's why.

As of November, the seasonally adjusted annual sales rate was 5 million units, 20 percent below the 6.25 million units sold by November 2006. That sounds disastrous until you consider that In 2004 and 2005, over one-third of homes sold to second home buyers and investors. And about 10 percent of all buyers were subprime.

By November 2007, the speculators and poor credit risks were driven out of the market. Those were the buyers who wouldn't have bought anyway -- except for the incredible oversight of the banking regulators.

That means the 2007 numbers are comparing favorably to previous years when the market wasn't torqued by unusual numbers of buyers. Driving the markets today are the occupying homebuyers and in greater numbers than during the speculative boom of 2001 to 2005.
If greater numbers of occupying homebuyers are buying, the bottom is here, and there's an outside chance a new boom could explode. Why? Prices are down over three percent from November 2006. Homes to choose from are plentiful at a 10-month supply on hand. The median home price in America is back down to $210,200, only $15,000 higher than 2004. Buyers still believe that a home is a pretty good place to put their money, and even with stricter credit, most can still get in with as little as 5 percent down. First time homebuyers with okay credit and $5,000 in the bank can still get 100 percent financing through the California Housing Finance Agency. If you know of someone who needs a home or a loan have them call or e-mail me for the details.


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