By Orlando Lee Rodriguez
Sales of existing U.S. homes continue to rise, leaving supply levels at their lowest since March 2005. But foreclosed properties and short sales continue to make up a significant portion of the total, causing uneven growth and not helping depressed housing prices.
Lower prices are continued good news for bargain hunters and investors, but not for sellers of conventional properties or homebuyers with average credit.
According the National Association of Realtors, 4.57 million homes changed hands in January; an increase of 4.3 percent over Decembers revised numbers. Of total sales however, 35 percent were distressed properties sold at a deep discount.
31 percent were all cash deals, pointing to investors and not primary residents, further indication that growth in home sales is significantly driven by continued high levels of distressed housing stock.
Chief NAR economist, Lawrence Yun described current market conditions a “rough balance” where neither buyers nor sellers have the upper hand.
“Foreclosure sales are moving swiftly with ready home buyers and investors competing in nearly all markets.” said Yun. “The uptrend in home sales is in line with all of the underlying fundamentals – record-low mortgage interest rates, bargain home prices and rising rents.”
The average national rate for 30-year fixed mortgages hit record lows in January, down to 3.92 percent, according to Freddie Mac. This compared to 4.76 a year ago. This is welcome news for current renters with good credit scores and at least 20 percent down, but not for sellers.
Average national home sale prices are lower, at $154,700 for a single family home down 2 percent from a year ago. These prices should lure potential buyers as the normally busy spring and summer approach, keeping sales growth steady.
This is a cause for careful confidence in disproportionately hard-hit markets like Miami, Florida.
Moe Veissi, President of the National Association of Realtors and broker of the Miami based Veissi & Associates, said that he felt growth would continue as the year progresses driven by basement bargain prices and low mortgage rates.
“Our members are reporting an increase in foot traffic compared with a year ago” Veissi said. “With other favorable market factors, these are hopeful indicators leading into the spring home-buying season. We’re cautiously optimistic that an uptrend will continue this year.”
Here in New York however, brokers see the upward trend mostly confined to Manhattan. Victor H Gutierrez, an independent broker in the city says that the tight credit market is still weeding out the average buyer.
“Manhattan is the only borough that is really on the up an up” he said. “Even underneath that, are foreclosures and investors driving it or re-modifications being done. From what I can see, sales are still level or barely moving in the outer boroughs.”
The continuing tight credit market, combined with a large amount of foreclosures and short sales mean that we may not see a overall push from existing home sales on the general economy for quite some time.
Buyers usually sink money into their new homes with furniture, appliances and general improvements. Sellers for the most part, purchase another home as well, continuing the same cycle. When homes are purchased at a deep discount, particularly by investors as they are right now, retail outlets do not see any impact, keeping the overall economy stagnant.