Finance Globe

U.S. financial and economic topics from several finance writers.
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Fourth Quarter Home Sales Strong

Existing home sales were strong across most states during the fourth quarter of 2009 with many metro areas showing price increases from a year earlier, the National Association of Realtors (NAR) reported on Thursday.

Fourth quarter sales increased from the previous quarter in 48 states and the District of Colombia and 32 states had gains in the double digits. Total existing home sales increased 13.9% to a seasonally-adjusted annual pace of 6.03 million in the fourth quarter, up from a pace of 5.29 million per year in the previous quarter. Also, a smaller percentage of distressed properties is driving sales, making up 32% of transactions in the fourth quarter compared to 37% of transactions a year earlier.

Lawrence Yun, NAR chief economist, said the first-time home buyer tax credit was the dominant factor. "The surge in home sales was driven by buyers responding strongly to the tax credit combined with record low mortgage interest rates," he said. "With inventory levels trending down over the past 18 months, we expect broadly balanced housing market conditions in much of the country by late spring with more areas showing higher prices."

Interest rates also fell to a record low, making owning a home much more affordable for many. According to Freddie Mac, the average interest rate for a thirty-year conventional fixed rate mortgage was 4.92% in the fourth quarter, down from 5.16% in the previous quarter. This is nearly a percentage point lower than it was a year ago when it was 5.86%.

The median home price in the fourth quarter is reported to be higher than it was a year earlier in 67 out of 151 metro areas, with 16 of those metros experiencing gains in the double digits. One metro area experienced no change in the median home price, and 84 metros continued to have price declines. In the third quarter, only 30 metros showed annual price gains and 123 areas were down.

The national median existing single-family price was $172,900, which is 4.1 percent below the fourth quarter of 2008; the median is where half sold for more and half sold for less. "This is the smallest price decline in over two years, with the most recent monthly data showing a broad stabilization in home prices," Yun said.

“Because buyers are taking on long-term fixed rate mortgages, avoiding adjustable-rate products, and trying to stay well within their budgets, the price recovery process appears durable,” Yun said.

Regionally, for the fourth quarter, existing-home sales in the Northeast were up 11.1% to an annual rate of 1.03 million and are 33.6% higher than a year ago. The median existing single-family home price in the Northeast declined 5.6% to $234,900 in the fourth quarter from a year ago. Sales conditions varied widely throughout areas in the Northeast.

"In the Northeast, markets with lower median prices that have avoided wide swings, such as Buffalo, are generally showing consistent price gains," Yun said. "Even so, some of the higher cost areas are showing signs of stabilization, such as Nassau-Suffolk, N.Y., and Boston."

Existing home sales in the Midwest surged 14.5% in the fourth quarter to a rate of 1.38 million, and are 29.9% higher than they were a year ago. The median existing single-family home price rose to $141,100, a 1.1% price gain from from the fourth quarter in 2008.

Yun said markets with high unemployment rates in Ohio and Michigan experienced large price swings. "Big price gains in many Midwestern areas are due to a more normal range of home sales in contrast with predominately foreclosed sales a year ago," he said.

In the South, existing-home sales rose 13.8% in the fourth quarter to an annual pace of 2.23 million to a level 28.2% higher than the fourth quarter of 2008. The median existing single-family home price in the South was $153,000 in the fourth quarter, down 2.4% from a year earlier.

"Affordable markets in the South that have relatively better local economies are seeing healthy price gains, such as Houston, Oklahoma City and Shreveport, La.," Yun said.

Existing-home sales in the West jumped 16.2% in the fourth quarter to an annual rate of 1.38 million and are 18.2% above a year ago. In the fourth quarter, the median existing single-family home price in this region was $227,200, which is 8.9% below the same quarter a year ago, but with many areas showing notable gains.

"Markets in the West such as San Francisco, San Jose and Denver are showing double-digit price increases, and other markets like San Diego and Anaheim have begun to firm up," Yun said.

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Monday, 27 May 2024

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