U.S. homes sales saw an impressive 6.5% increase in December, but economists warn that this increase is associated with key problems found in the market. If fact, a recent report from the National Association of Realtors (NAR) offers additional numbers regarding median home prices and supply that provide a more realistic perspective on whats really going on.
Median Home Prices Have Dropped
While we saw existing home sales increase from a 4.45 million unit annual rate in November to 4.74 million units in December, the median national home price dropped by a record 15.3% to $175,400. In other words, the reason that home sales are increasing is because people are taking advantage of cheaper houses on the market. And theyre cheaper because the market negatively shifted after a staggering 2.3 million homes defaulted and/or suffered foreclosure last year.
Supply Has Dropped, But Still Abundant
From November to December, the inventory of homes for sale dropped 11.7% from 4.16 million units to 3.68 million, which translates to approximately 9.3 months of available supply. Often times, having supply drop is a sign that people are snatching up homes, but this is not quite whats happening here. While some buyers are taking advantage of low prices, real estate investors who are used to making a profit refuse to sell until the market turns, thus reducing the available inventory on the market.
Since the final numbers of 2008 show that existing home sales fell 13.1%, the small increases we may see from month to month do not realistically reflect some of the lowest numbers seen in the market since the NAR began keeping records. If there is another increase in home sales for January, do you think the market is showing signs of a recovery?
