Home Purchases Up, But Earlier Sales Look Weaker
The number of Americans who bought previously occupied homes rose last month. But the National Association of Realtors says it overstated about 3.5 million sales during and after the Great Recession, showing the housing market remains much weaker than previously thought.
The private trade group says sales rose 4 percent last month to a seasonally adjusted annual rate of 4.42 million. That’s below the roughly 6 million sales a year that economists say are consistent with a healthy housing market. But it’s ahead of 2008’s revised sales, now considered the worst in 13 years.
The nearly 4.2 million homes sold last year are far fewer than the nearly 7.1 million sold at the peak of the housing boom in 2005. This year is on pace to slightly exceed last year’s total of about 4.25 million.
The trade group revised down its sales from 2007 through October more than 14 percent, from 24.8 million to nearly 21.3 million. Among the reasons for the lower figures, the Realtors group says: changes in the way the Census Bureau collects data, population shifts and some sales being counted twice.
The sharp revisions could cast doubt on future sales numbers from the Realtors’ group, a private trade organization that lobbies on behalf of its 1.2 million members.
John Ryding, an economist at RDQ Economics, called the revisions “massive” and cited them as an example of how economic data can be unreliable.
The Realtors’ group said it trusts its new figures, which were checked by government agencies and CoreLogic, the California-based real estate data firm that first raised questions about the numbers earlier this year.
Other economists said the lower numbers won’t necessarily matter, since sales are up and fewer homes are sitting idle waiting for buyers. Sales have risen more than 12 percent over the past 12 months. The supply of unsold homes has fallen more than 18 percent.
More than two years after the recession officially ended, many people can’t qualify for loans or meet higher down-payment requirements. Even those with excellent credit and stable jobs are holding off because they fear that home prices will keep falling.
Sales are also being hurt by a decline in first-time buyers, who are critical to reviving the housing market.
The new figures show that sales fell in three of the past four years since the housing market began to drop in 2006. Declining prices and record-low mortgage rates haven’t been enough to boost sales.
The changing numbers could affect how economists view the trade group’s data. It could also affect companies that use the figures for hiring and expansion plans.
Sales are measured when buyers close on homes. But many deals are collapsing before that point. One-third of Realtors say they’ve had at least one contract scuttled in November and October, up from 18 percent in September.
Contracts have been canceled for any of several reasons: Banks have declined mortgage applications; home inspectors have found problems; appraisals showed a home was worth less than the bid; a buyer lost a job before the closing.
The median sales price rose 2.1 percent to $164,200 in November. The high rate of foreclosures has made resold homes much cheaper than new homes. The median price of a new home is roughly 30 percent higher than the price of one that’s been occupied before — twice the normal markup.
Investors are taking advantage of the discounts. Their purchases made up 19 percent of all sales last month, compared with fewer than 10 percent in healthier housing markets.
Purchases among first-time buyers rose slightly last month to make up 35 percent of sales, up from 34 percent in October. In healthy markets, first-time buyers make up at least 40 percent of sales.
At the same time, homes at risk of foreclosure made up 29 percent of sales last month. That’s up from 28 percent in October. Those homes made up less than 10 percent of sales in healthier periods. Investors are increasingly buying homes priced under $100,000.
Sales rose across the country in November. They increased on a seasonal basis by nearly 10 percent in the Northeast, 4.3 percent in the Midwest, 3.6 percent in the West and 2.4 percent in the South.
The glut of unsold homes declined to 2.58 million homes. At last month’s sales pace, it would take seven months to clear those homes. Analysts say a healthy supply can be cleared in about six months.
(Copyright 2011 by The Associated Press. All Rights Reserved.)