Tight Supply Drives Existing Home Prices Higher

Sales
of existing homes
fell in May, but that decline may have been due to a lack of
available homes rather than a lack of demand. 
According to the National Association of Realtors® (NAR), total existing
home sales including single family homes, townhomes, condominiums, and
cooperative apartments, declined 1.5 percent to a seasonally adjusted annual
rate of 4.55 million in May from 4.62 million in April.   Sales
were up 9.6 percent from the 4.15 million sales pace in May 2011.  The national median existing-home price3 for all housing types rose 7.9 percent to $182,600
in May from a year ago, the third consecutive month of year over year price
gains.

The
total inventory of homes for sale at the end of May was down 0.4 percent to
2.49 million existing homes, a 6.6 month supply at the current sales pace.  One year ago there was a 9.1 month supply and
at a cyclical peak in July 2010 the inventory stood at a 12.1 month supply.

Existing Home Sales

Click Here to View the Existing Homes Sales Chart

Lawrence Yun,
NAR chief economist, said inventory shortages in certain areas have been
building all year.  “The slight pullback
in monthly home sales is more likely due to supply constraints rather than
softening demand.  The normal seasonal
upturn in inventory did not occur this spring,” he said.  “Even with the monthly decline, home sales
have moved markedly higher with 11 consecutive months of gains over the same
month a year earlier.”

Yun said properties in the
lower price ranges are in short supply in much of the country outside of the
Northeast.  Real estate agents in western
states have been calling for an expedited process to get additional foreclosed
properties on the market to alleviate shortages and much of Florida is in a
similar situation.

Sales of single family homes
were down 1.0 percent to a seasonally adjusted rate of 4.05 million from 4.09
million in April.  This is 10.4 percent
above the 3.67 rate of sales one year earlier. 
Condo and co-op sales were down 5.7 percent to a rate of 500,000 from
530,000 a month earlier but are 4.2 percent higher than a year earlier.

The median price for a single-family
home was $182,900, an increase of 7.7 percent from May 2011 while the median
condo price saw an annual increase of 8.8 percent to a median of $180,000.  “Some of the price gain results from a
shrinking share of distressed homes in the sales mix,” Yun explained.

Foreclosures accounted for 15 percent of
sales in May and short sales for 10 percent. 
This 25 percent share is down from 28 percent in April and 31 percent in
May 2011.  Foreclosures sold for an
average discount of 19 percent below market value in May, while short sales
were discounted 14 percent.

First-time buyers accounted for 34
percent of purchases, down from 35 percent in April and 26 percent in May 2011.
 Investors purchased 17 percent of homes,
down from 20 percent in April and 19 percent a year earlier.  All-cash sales represented 28 percent of
transactions compared to 29 percent and 30 percent in the earlier periods.

NAR President Moe Veissi said there are reports
of multiple offers and quick sales in areas with a tight supply of housing and
of competition between first-time buyers and cash investors.  He advised buyers to continue to perform due diligence
and make offers with appropriate contingencies as they would in a more balanced
market.

Regionally, existing-home sales in the Northeast fell
4.8 percent to an annual level of 590,000 in May but are 7.3 percent higher
than May 2011.  The median price in the
Northeast was $250,700, up 3.8 percent from a year ago.

Midwest sales rose 1.0 percent to a pace of 1.04 million,
9.5 percent above a year ago.  The median
price in the Midwest was $147,700, up 6.4 percent from May 2011.

Sales in the South were down 0.6 percent to an annual level
of 1.78 million but are 9.2 percent
higher May 2011. 
The median price in the South was $159,700, up 7.8 percent from a year
ago.

Existing-home sales in the West declined 3.4 percent to
an annual pace of 1.14 million in May but are 3.6 percent above a year ago.  The median price in the West was $233,900, up
13.4 percent from May 2011.  “The sharp
price increase in the West results largely from more sales at the upper end of
the market,” Yun explained.

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NAR: Existing Home Sales and Inventories Improved in January

There was more good news from the
National Association of Realtors® (NAR) on Wednesday as they reported that the
sales of existing homes rose in January, marking three months out of the last
four where sales improved.  Inventories of
homes for sale were also improved and NAR disputed the need for a program to
rent foreclosed properties

Total sales of existing homes
including single family houses, condominiums, and cooperative apartments, increased
4.3 percent
to an annual, seasonally adjusted rate of 4.57 million units during
the month compared to a downward revised rate of 4.38 million in December and
are 0.7 percent above what NAR described as a “spike” in the rate in January
2011.  December 2011 sales were
originally estimated at a rate of 4.61 million.

The median price of all property
types was $154,700 in January, an annual decrease of 2.0 percent.  Foreclosed properties accounted for 22
percent of all sales and short sales for 13 percent.  The total distressed sales were down 3
percentage points from the 35 percent reported in December and 5 percentage
points lower than those sales one year earlier.  

Sales of existing single-family
homes rose 3.8 percent to 4.05 million from 3.90 million in December and are
2.3 percent higher than the 3.96 million pace in January 2010.  The median price of a single-family home was
$154,400 in January, down 2.6 percent from a year earlier.

Click Here to View the Existing Homes Sales Chart

Condominium and co-op sales jumped
8.3 percent to 520,000 from 480,000 in December but remained10.3 percent below
the 580,000-unit level in January 2011.The median existing condo price was
$156,600, up 2.0 percent from the year before.

Total
housing inventory at the end of January fell 0.4 percent to 2.31 million
existing homes available for sale, which represents a 6.1-month supply at the
current sales pace, down from a 6.4-month supply in December.  Total
unsold listed inventory has trended down from a record 4.04 million in July
2007, and is 20.6 percent below a year ago. 

Lawrence Yun, NAR chief economist,
said strong gains in contract activity in recent months show buyers are
responding to very favorable market conditions.  “The uptrend in home
sales is in line with all of the underlying fundamentals – pent-up household
formation, record-low mortgage interest rates, bargain home prices, sustained
job creation and rising rents.”

 “The
broad inventory condition can be described as moving into a rough balance, not favoring
buyers or sellers,” he said.  “Foreclosure sales are moving swiftly with
ready home buyers and investors competing in nearly all markets.  A
government proposal to turn bank-owned properties into rentals on a large scale
does not appear to be needed at this time.”

All-cash sales were unchanged at 31
percent in January; they were 32 percent in January 2011.  Investors, who
account for the bulk of cash transactions, purchased 23 percent of all homes in
January compared to 21 percent in December but unchanged from a year earlier.  First-time buyers accounted for 33 percent of
sales in January compared to 31 percent in December and 29 percent in January
2011.

Forty-seven percent of NAR members
report that contracts settled on time in January; 21 percent had delays and 33
percent experienced contract failures.  Contract cancellations are
unchanged from December but were only 9 percent in January 2011; they are
caused largely by declined mortgage applications and failures in loan
underwriting from appraisals coming in below the negotiated price.

Sales were up in every region but
prices were down.  In the Northeast
existing home sales were up 3.4 percent month-over-month and 7.1 percent
year-over-year to an annual rate of 600,000 but the median price of $225,700
was 4.2 percent lower than a year earlier.

Sales in the
Midwest were at a pace of 980,000, 1.0 percent higher than December and 3.2 percent
higher than one year earlier but the median price declined 3.9 percent to
$122,000.

In the South, sales
rose 3.5 percent from December to 1.76 million in January but are unchanged from a year ago while the median price
declined a slight 0.3 percent to $134,800 on an annual basis.

Existing-home
sales took a healthy 8.8 percent month-over-month jump in the West to a 1.23
million annual pace but are 3.1 percent below a spike in January 2011. 
The median price in the West was $187,100, down 1.8 percent from a year ago.

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NAR: Home Affordability Increases Nationwide

As prices continued to decline during
the fourth quarter of 2011 in most metropolitan areas of the U.S., housing
affordability
rose due not only to the lower prices but also because of record
low interest rates
.  The National
Association of Realtors® released its Housing Affordability Index (HAI) including
a new annual metro-level housing affordability index which shows historically
favorable conditions dominating across the country.

The median price of an existing single-family
home rose in 29 out of 149 metropolitan statistical areas (MSAs) in the fourth
quarter compared to the fourth quarter of 2010. 
Prices were unchanged in two MSAs and fell in 118.  The national median existing home price was
$163,500 in the fourth quarter compared to $170,600 one year earlier, a
decrease of 4.2 percent.  Distressed
homes – foreclosures and short sales – sold for discounts averaging 15 to 20
percent and represented 30 percent of total sales compared to 34 percent during
the same quarter of 2010.  The median
price of a condo was $160,800, down 1.7 percent from one year earlier.

The
national HAI rose to a record high 184.5 in 2011.  The Index base of 100 is defined as the point
where a median-income household has exactly enough income to qualify for a
median priced existing home with a 20 percent down payment and 25 percent of
the income devoted to mortgage principal and interest payments.  The higher the index, the greater the
household purchasing power.  For
first-time buyers making small downpayments, the affordability levels are
relatively lower.

Existing
homes sales, including single-family houses and condos, increased 5.9 percent
to a seasonally adjusted annual rate of 4.42 million compared to 4.17 million
in the third quarter.  This was 9.2
percent above the 4.04 million pace one year earlier. 

Inventories
of existing homes fell 21.2 percent over the period between Q4 2010 and Q4 201,
dropping from 3.02 million homes for sale to 2.38 million

The
share of all-cash home purchases in the fourth quarter was 29 percent, unchanged
from the third quarter and up one percentage point from the fourth quarter of
2010.  Investors, who are largely the all-cash purchasers, accounted for
19 percent of home sales in the third quarter virtually unchanged from the two
earlier reporting periods. First-time buyers purchased 33 percent of homes in
the fourth quarter again nearly unchanged from earlier quarters.

Sales
rose in all four regions both from third quarter figures and those of one year
earlier, but prices declined.  The
largest annual increase in sales was in the Midwest where sales were up 14.1
percent from Q4 2010. Quarter-over-quarter sales were up at least 3.8 percent
in every region with the West showing the greatest increase at 8.1 percent.  Median prices now range from $134,100 in the
Midwest to $229,200 in the Northeast.  . 

Lawrence Yun, NAR chief economist, said the figures reflect greater home
sales activity at lower price points.  “Sales have risen strongly in
lower price ranges from one year ago, while sales at the upper end remain
sluggish,” he said.  “More importantly, we’re seeing a consistent trend of
declining inventory, which means supply and demand conditions are becoming more
balanced in more areas, which will help stabilize home prices.”

Metro
areas with the greatest housing affordability conditions in 2011 include the
Detroit-Warren-Livonia area of Michigan, with an index of 383.4; Toledo, Ohio,
at 242.9; and Decatur, Ill., at 236.8.  Only 24 out of 152 metros measured
had an affordability index below 100 in 2011.

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