Existing home sales make up over 90% of all housing sales, and the fifth increase in six months, coupled with the best reading in over two years, indicates the housing market is well on the road to recovery.
One caveat: the National Association of Realtors said, “Much of the momentum is from people responding to the first-time buyer tax credit, which is freeing many sellers to make a trade and buy another home.” Historically low interest rates are adding to the upbeat mood.
Policymakers are concerned that an abrupt end to the tax credit, which is set to end on November 30, could bring the improvement in housing to an abrupt halt for several months, and realtors have been heavily lobbying for an extension of the credit.
Still, total housing inventory fell 7.5%to 3.63 million, which represents an 7.8-month supply at the current sales pace, down from an 9.3-month supply in August. Unsold inventory totals are 15.0 percent below a year ago.
“The current housing supply is the lowest we’ve seen in two and a half years,” NAR economist Lawrence Yun said. “If we could continue to absorb inventory at this pace, home prices would return to normal, modest appreciation patterns next year."
That comment seems to go against the conventional wisdom that a new wave of foreclosures next year will likely pressure prices. Stay tuned.
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