If you believe that housing will play a critical role in the recovery of our nation’s economy, today’s news from the National Association of Realtors (NAR) hopefully brought a smile to your face. But before I continue, I want to caution everyone that while NAR’s existing-home sale report looks good, we still have a ways to go for a full housing recovery.
So let’s look at what the report said. March home sales grew 6.8% from February and 16.1% over last March. Obviously this is comforting news. And according to today’s report, the rise in activity occurred nationwide.
So while sales are up, what is also very important to note is that inventory – the amount of homes on the market – continues to come down. Nationally, there are 3.58 million homes for sale which equates to an 8-month supply. This is down 21.7% from the record 4.58 million available homes in July 2008. To me, inventory is the most critical aspect of the housing scorecard.
A balanced market – where neither buyer nor seller has a distinct advantage – is traditionally 6 months. And for 20 straight months, NAR has reported that year-over-year inventory levels have dropped. Slowly we are burning off inventory. And because inventory levels are coming down, we are seeing home prices stabilize in many markets around the country. It’s simple supply and demand.
Nationally, showing that stabilization, the median home price stands at $170,000 which is relatively unchanged from last March. And don’t forget because 35% of all sales were foreclosures or short sales, which we refer to as “distressed properties,” the median home price has taken a hit. That’s because NAR estimates that these homes sell for 15% less than a “traditional” home would go for.
Finally, the federal tax credit seems to be working. NAR reported that first-time homebuyers accounted for 44% of all homes sales in March. That number had dipped greatly in previous years and is now back to more normal levels.
One of my first jobs was as a math teacher. I love numbers. I hope I was able to put them in perspective for you today. But if you need a greater explanation, just let me know.