October Home Sales Far Exceeded Expectations
By JAVIER C. HERNANDEZ
Copyright by The New York Times
Published: November 23, 2009
http://www.nytimes.com/2009/11/24/business/economy/24econ.html?hpw
Existing home sales in October rose to the highest level in more than two years, according to a report released Monday, driven by the popularity of a credit for first-time home buyers. The surge far outpaced expectations and nurtured hope that the stubbornly frail housing market may be on the upswing.
Sales of existing homes were up 10.1 percent in October to an annual rate of 6.1 million, the National Association of Realtors said in a report Monday — a level last seen in February 2007, before the collapse of the housing sector. Analysts surveyed by Bloomberg News had predicted a 2.3 percent increase.
The group attributed the gain to the popularity of a government-financed credit of up to $8,000 for first-time home buyers, which was renewed earlier this month. In addition, consumers are taking advantage of lower prices and mortgage rates, even at a time of pervasive unemployment and uncertainty over the pace of economic renewal.
Inventories continued to shrink, the report said, and prices, while still low, fell by the smallest level in more than a year.
Sales were up 23.5 percent from the October 2008 rate of 4.94 million. In addition, sales for the 12-month period from October 2008 to October 2009 reached 4.4 million, up slightly from the October 2007 to October 2008 levels.
The gains surprised even the Realtor group’s chief economist, Lawrence Yun, who cautioned that future results may be more modest. “With such a sale spike, a measurable decline should be anticipated in December and early next year before another surge in spring and early summer,” he said.
Economists closely monitor trends in home sales because their effects ripple through the economy. Consumers, in effect, are not just buying houses: they are also furnishing them with items like washers, tables and mattresses. Once Americans begin to spend again, analysts expects businesses will begin hiring and the economy will be on firmer ground.
The report examined sales of single-family homes, as well as condos and co-ops. The group revised its September figures, saying home sales rose by 8.8 percent rather than the 9.4 percent it originally reported.
Even amid inklings of a turnaround for housing market, there are still reminders that the sector remains very weak.
Just last week, the government reported that builders broke ground on new homes at the slowest rate in six months. Construction of apartment buildings reached the lowest level since the department started collecting housing data in 1959, and building permits, an indicator of future construction, also fell.
Celia Chen, senior director at Moody’s Economy.com, noted that sales of existing homes — especially those that have been foreclosed and tend to be cheaper — may be slowing the pace of home construction, as builders grapple with low demand for expensive new homes.
“The housing sector needs help,” she said. “It’s important to shore-up the market because that is a large part of the economy and will be helpful in stabilizing the broader economy.”
And while home sales may be picking up, consumers still face slender paychecks and are struggling to keep up with bills. The Mortgage Bankers Association said last week that nearly one in 10 homeowners with mortgages — about 5 million households — was at least one payment behind in the third quarter.
Buyers throw a house party in October - Tax credit, low prices and interest rates credited for upsurge, but some say it could be short-lived
By Mary Ellen Podmolik
Copyright © 2009, Chicago Tribune
November 24, 2009
http://www.chicagotribune.com/business/chi-tue-home-sales-1124nov24,0,7399950.story
Shoppers scooped up homes in October, giving the housing market a much-needed jolt as a moribund year winds down for the industry.
Spurred by the anticipated expiration of a first-time buyer's federal tax credit, Chicago-area sales of existing single-family homes and condos in October vaulted 33.3 percent from the same month last year, to 7,286 homes. Still, the pace did not top that of July, when 7,427 homes were sold.
Prices, however, continued to plummet. The median price of a home in the Chicago area last month was $190,000, down 15.6 percent from October 2008's $225,000, the Illinois Association of Realtors said Monday.
It was the best October for sales in the Chicago area since 2006, when more than 9,000 homes were sold. The performance gives credence to the theory that the $8,000 first-time homebuyer's tax credit, which earlier this month was extended until next spring and expanded to include move-up buyers, nudged consumers into a home purchase.
Many of last month's purchases were first-time buyers like Adrian Parent, who with fiance Dan Pippel closed on a three-bedroom, two-bathroom ranch in Warrenville.
The couple, who were renting in Wheaton, started looking in earnest in April, attracted by low home prices and interest rates and the federal tax credit. Offers on three other properties that were either short sales or bank-owned foreclosures fizzled.
Parent, whose parents are real estate agents in St. Charles, and Pippel stuck with it and found the Warrenville property, which cost more than they wanted to spend but was move-in ready.
"With the tax credit, that was a good enough incentive to give us a push," said Parent, who is looking forward to her first Christmas in a her own home.
The local market and the Midwest bested the national housing scene.
Nationally, existing-home sales rose 23.5 percent in October, to a seasonally adjusted rate of 6.1 million units, the highest sales activity since February 2007, the National Association of Realtors reported. Sales in the Midwest were 28.8 percent ahead of a year ago. The supply of homes nationally is at its lowest level in more than 2 1/2 years.
The national report was enough to help Wall Street reverse three days of losses. Major stock indexes moved up more than 1 percent and the Dow Jones industrials rose nearly 133 points, to a 13-month high.
Still, Lawrence Yun, chief economist for the national Realtors' group, warned that November may show similarly robust sales, but after that spike a "measurable decline" is likely in December and in early 2010.
That sentiment is echoed locally.
Sue Nagel, a real estate agent at Prudential Prairie Path Realtors, conducted an open house in Elmhurst a week ago that attracted 22 groups of people, and another Sunday in Naperville that attracted 17 groups. Still, she thinks the holidays will temporarily slow transactions.
"I think next year is going to be a great year," she said.
Chicago had its best month of the year, with home sales rising 28.5 percent last month, to 2,012 sales compared with 1,566 homes sold in October 2008. The median price in the city was $215,000,18 percent less than the same month a year ago. The median price means half the homes were sold for more than that and half for less.
Sales of Chicago condos jumped 29 percent, to 1,193 units sold during the month. The median price of $263,000 was 16.8 percent less than a year ago.
"There was this great flurry of activity in October where folks said, 'I want to get in on this,' " said Mabel Guzman, president-elect of the Chicago Association of Realtors. "First-time homebuyers created this great rally."
Local economists and real estate agents are optimistic but unwilling to read too much into the data, particularly since Illinois' official unemployment rate hit 11 percent last month.
"I'm very cautious about extrapolating on one month," said Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory at the University of Illinois at Urbana-Champaign. "A lot of things came together to make it a good month."
The average monthly commitment rate for a 30-year, fixed-rate mortgage for the North Central region last month was 5 percent, according to the Federal Home Loan Mortgage Corp. Rates remain near that level.
Real estate agents also worry that the positive buzz will prompt home sellers to think the market is something it's not: appreciating in terms of price. Real estate Web site Trulia.com reported this month that 32 percent of the Chicago homes on the market Nov. 1 had at least one price reduction during the past 12 months.
"You've got to have the housing looking good and priced right," said Christina Becker, an agent at J.W. Reedy Realty. "Don't think you're going to make a lot of money."
mepodmolik@tribune.com
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