us existing home sales hits 30 month high as supply contracts
News Posted On: 24 November 2009
Last week a report by the National Association of Home Builders showed that sentiment was at the highest level since May 2008.
Now a new National Association of Realtors (NAR) report shows that sales of existing homes surged by a record 10.1 percent from September to October, to an annual rate of 6.10 million units. The result was well ahead of market expectations for a rise to 5.70 million from September's 5.54 million.
Sales of single-family homes rose by 9.7 percent, while condominium and co-ops increased 13.2 percent.
Meanwhile supply continued to contract. The number of existing homes for sale in October fell to 3.57 million units, representing seven months worth of inventory at current sales rates. A 7 month supply of housing stock represents the lowest figure recorded in 2-1/2 years, down from September's eight months. If supply continues to fall to below six months' supply analysts say this will represent equilibrium between buyers and sellers, essentially a stable market. If the monthly supply drops even further we could see another bubble born.
After a 3-year decline, which contributed to creating the worst US recession since the war, the housing market is showing distinct signs of recovery, spurred on by buyers seeking to gain the current tax credit incentive offered by government.
"Although the data are biased higher from policy measures, we do believe this sharp gain signals pent-up demand and a willingness to purchase homes, which is a good sign for the sustainability of the housing recovery," said Michelle Meyer, an economist at Barclays Capital in New York.
NAR's chief economist Lawrence Yun said the group expected strong November sales due in part to the federal tax credit stimulus.
"Home prices are almost there. We are seeing less of a decline in house values," he added, referring to the fact that the annualised decline in home values fell 7.1 percent to $173,100, the smallest such decline in over a year.
Low interest rates are underpinning the recovery in housing and business in general. By purchasing mortgage-related assets the Federal Reserve is helping to keep home loans cheap. On Sunday, a regional Fed bank spokesman James Bullard said the U.S. central bank should keep this program going beyond its current expiration date of March next year. This should help extend the recovery in housing..
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