Home Sales Hit Highest Level in Six Years

By Gino Blefari, President & CEO, Intero Real Estate Services, Inc.

Home sales ended the summer on a high note, reaching their highest level in over six years in August. Prices went along for the ride, with the median price trending nine consecutive months of double-digit year-over-year increases.

Recovery meets growth. Now we’re making serious progress.

According to the most recent data from the National Association of Realtors, total existing-home sales – including single-family, condos, townhomes and co-ops – increase 1.7% to an annual rate of 5.48 million in August. The pace was up from 5.39 million in July and 4.84 million in August 2012.

To give you a bit more perspective on how the market is doing overall post-recovery, August sales were at the highest pace since February 2007, when they were 5.79 million. Sales have outpaced year-ago levels every month for the past 26 months.

How long can we expect the trend to continue? Will we hit a peak before the end of the year?

These are logical questions to which there’s never a clear answer.

NAR’s chief economist said we may be seeing a temporary peak, citing two factors that threaten to slow pace: tight inventory and rising interest rates.

There were 2.25 million existing homes available for sale in August – a 4.9-month supply at the current sales pace. This was down from a 5.0-month supply in July. The limited inventory in some markets has created multiple bid situations, meaning some buyers are being priced out. NAR said that 17% of all homes sold above the asking price in August, although 63% sold below list price – showing yet again that in housing, it’s all relative to location. Some markets are moving rapidly, while others are still slogging through.

In pricing, the national median price for existing homes was $212,100 in August, up 14.7% from the same month a year ago and the strongest yearly gain since October 2005.

The share of distressed home sales is shrinking, accounting for 12% of August sales, down from 15% in July and the lowest since monthly tracking began in October 2008. Meanwhile, 8% of August sales were foreclosures, and 4% were short sales.

The time it takes to sell a home was little changed in August – 43 days, compared with 42 days in July. However, much progress has been made in the last year, as it took 70 days on the market in August 2012.

Overall, it was a fantastic summer for housing nationwide, with some markets enjoying rapid sales with multiple bids and others simply enjoying healthy pace. The question remains of whether we’ll see a dip in market activity between now and the end of the year. For some markets, that’s likely to happen. But for others – especially where inventory is low but buyers are eager to purchase – we’ll likely continue to see growth in both volume and price.


The Fuzzy State of Owner Occupancy

In real estate news, you frequently see conflicting headlines based on different data, markets or points of view. I spotted one this week that has to do with an important detail in the housing recovery: owner occupants.

You see, during the housing frenzy years that led up to the recession, much of the speculative activity that was driving the bubble came from investors – both professional and hobbyists – who were in it for the buck. Remember the house flipping shows on cable networks?

Owner occupancies play an important role in the housing recovery as they signal stability in real demand versus investor-driven demand, which can be a lot more finicky.

The state of owner occupants right now is a little fuzzy. It’s likely to be different depending on your market. And new versus existing homes may be telling different stories.

story in Bloomberg Businessweek highlights a forecast from Metrostudy, a Houston-based real estate consulting firm, which expects double-digit increases in new home prices through the end of the year, driven by demand from owner occupants. Metrostudy analysts generally see more owner occupied life in new housing developments they track versus the tell-tale signs of investors – empty driveways, curtain-less windows, lack of toys in the yard.

Brad Hunter, chief economist of Metrostudy, told Businessweek:

“People are buying homes to live in them. That wasn’t always the case at the height of the frenzy last decade, when speculators financed ultracheap mortgages and zero down payments bought newly built, unoccupied homes – and sometimes empty lots – to flip to the next buyer.”

Of course, next year, he says, will be different.

Meanwhile, the market for existing homes still has a healthy share of investors. NAR reported last month that individual investors purchased 17% of homes in June, down from 18% in May and 19% in June 2012. This shows a little shrinkage, but not enough to think that this share of buyers is on a definitive downward spiral.

As unscientific as it may seem, the best way to gauge the state of owner occupancy in a neighborhood is to walk around and take note of whether there’s life in the homes being bought or whether they seem to be tenant occupied or empty.

As the folks at Metrostudy point out, toys in the yard, a hose outside and curtains on the windows are good signs that families are around.

As we try to gauge the state of the housing market each week, owner occupancy is an important statistic to examine. If we start seeing a trend in new housing developments with a low percentage of owners living in them, that may signal a larger move toward speculative investing again.
By Gino Blefari, President & CEO, Intero Real Estate Services, Inc.