Thread: Home sales pace increases in December, third month in a row

Home sales pace increases in December, third month in a row

By Derek Kravitz, Associated Press Updated 2h 45m ago

WASHINGTON – Home sales in December reached the highest pace in nearly a year. The gain coincided with other signs that the troubled U.S. housing market improved at the end of2011.

Analysts caution that sales remain historically low and it will take years for the home market to return to full health.

Still, the third straight monthly sales increase was encouraging. And economists noted that conditions are in place for further gains this year:

Prices have declined. Mortgage rates have never been lower. Homebuilders are slightly more hopeful because more people are saying they might be open to buying this year. And home construction picked up in the final quarter last year.

Sales rose across the country in December. They rose on a seasonal basis more than 10% in the Northeast, 8.3% in the Midwest, 2.9% in the South and 2.6% in the West.

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"There's no denying that home sales are still very low and will remain low for a few years," said Paul Dales, an economist with Capital Economics. "But after having risen in each of the last three months … it is clear that a housing recovery is now well under way."

Sales of previously occupied homes rose 5% to a seasonally adjusted annual rate of 4.61 million in December, the National Association of Realtors said Friday. It's the best level since January 2011.

Home sales
For all 2011, sales totaled only 4.26 million. That's up slightly from 4.19 million in the previous year. But it's far below the 6 million that economists equate with healthy housing markets. In 2005, at the peak of the boom, 7.1 million homes were sold.

Hiring has improved, which is critical to a housing rebound. Fewer people sought unemployment benefits last week than at any time in nearly four years, evidence of far fewer layoffs. The unemployment rate fell in December to its lowest level in nearly three years.

"With layoffs slowing sharply, hiring rising and consumers' confidence rebounding, the pre-conditions for a sustained recovery are falling into place," said Ian Shepherdson, chief U.S. economist for High Frequency Economics. "Sales and starts will keep rising; prices should stabilize, more or less."

The median sale price of a previously occupied home ticked up 0.3% from November to December to $164,500.

The supply of homes has declined, though it's still historically high at 2.38 million. At last month's sales pace, it would take nearly seven months to clear that backlog.

If the supply continues to fall, prices could rise, more sellers would put homes on the market and more people would likely consider buying, said Pierre Ellis, an analyst at Decision Economics.

Still, the industry appears years away from fully recovering from its bust four years ago. Since the bubble burst, sales have slumped under the weight of foreclosures, tighter credit and falling prices.

Fewer first-time buyers, who are critical to a recovery, are in the market for a home. Purchases among that group fell last month to just 31% of sales from 35% in November. In healthy markets, first-time buyers make up at least 40%.

Homes at risk of foreclosure made up a third of sales last month. In strong markets, they make up only about 10% of sales.

And many deals are collapsing before they close. One-third of Realtors say they've had at least one contract scuttled in December, November or October. That's up from 18% in September.

Among the reasons contracts have been canceled: Banks have declined mortgage applications. Home inspectors have found problems. Appraisals showed that a home was worth less than the bid. Or a buyer suffered a financial setback before the closing.

Home sales end 2011 with a 5% gain in December

Real Property values are not projected to recover from this real estate glut/crisis for at least another decade on a national basis.

Sure, there will be pockets where the real estate will somewhat rebound, but nothing like it was just four years ago.

The days of 2nd Mortgages are history, and will be for at least ten years.

This is going to impact the federal, state, and local government revenue purses on a historic scale, once it compounds.

The reason is that real estate valuations are almost universally appraising for 30 to 40% LESS than they did just 18 months ago, yet PROPERTY TAXES remain at the pre-bubble POP values.

What this means is that the MAJORITY of Americans are still paying property tax rates on properties that have been DEVALUED up to 40%, yet the tax rate NEVER WENT DOWN.

Once this sinks in, there will be a tremendous tax revolt.