Existing home sales stabilize

Existing home sales increased 2.7% to a seasonally adjusted annual rate of 5.36 million in January from a downwardly revised 5.22 million in December, and are 5.3% above the 5.09 million level in January 2010.

This is the first time in seven months that sales activity was higher than a year earlier, according to data supplied by the National Association of Realtors.

In another sign that the market is beginning to heal, housing inventory fell 5.1% to 3.38 million existing homes available for sale, which represents a 7.6-month supply at the current sales pace, down from an 8.2-month supply in December.

Last year’s peak in inventory occurred in August at a level of 4.1 million units, which represented a supply of 11.7 months.



NAR chief economist Lawrence Yun said the improvement is good but could be better. “The uptrend in home sales is consistent with improvements in the economy and jobs, which are helping boost consumer confidence,” Yun said.

“The extremely favorable housing affordability conditions are a big factor, but buyers have been constrained by unnecessarily tight credit. As a result, there are abnormally high levels of all-cash purchases, along with rising investor activity.”

I might add that sluggish job growth and the uncertainty surrounding where home prices are headed are also depressing demand.

Despite indications that sales are slowly improving, the rising number of distressed sales  (37% of the market in January), along with high levels of all-cash purchases (28% last year), continue to depress housing prices, which are down 3.7% from one-year ago to a median price of $158,800, the lowest in nearly nine years.

Meanwhile, indications that sales of existing homes are beginning to stabilize or even slowly improve are being called into question by the NAR’s decision to review data going back to as far as 2007, according to the Wall Street Journal and several other news agencies.

The data are being looked at to determine whether revisions are necessary, with a decision expected by the summer. Economists have raised concerns about the NAR's data, saying sales may be overstated by as much as 20%, the Journal said.

"I don't know what that revision will be," Yun told reporters at a briefing to discuss the January data.

"But most indicators imply that NAR data probably has some upward drift," he said, noting that the last re-benchmarking in 2000 showed that the group's sales estimates were overstated by about 13%.

Though recent trends are more important and paint a picture of what’s happening right now, a downward restatement would show that the housing debacle over the last few years was worse than previously thought and could call into question the reliability of data gathering techniques used by the realtor-based organization.