Signs are mounting that US housing is on the bottom, something which many savvy investors have already cottoned onto in the last 2-6 months. The best sign of a market bottoming for investors is their own gut telling them when prices really can't fall any further. In the last few months several separate sources have put US housing affordability at a 30 year high, and prices were even getting so low as to make buying cheaper than renting, so many people have come to say that this time for the US housing market was upon us.
But now it is being backed up by cold hard evidence. According to the latest data from the National Association of Realtors US home sales rose 5% year on year in December to 4.61 million, which was also up from 4.39 million in November. This is now the third consecutive month that US home sales have grown.
NAR data is based on completed sales figures from US Multiple Listing Services (MLS), including sales of single family homes, town houses and condominiums. According to Lawrence Yun, NAR chief economist this "pattern of home sales in recent months" is clearly indicative of a market in recovery. "Record low mortgage interest rates, job growth and bargain home prices are giving more consumers the confidence they need to enter the market," he said.
For 2011 as a whole, existing home sales rose 1.7% to 4.26 million. As a result, inventory, which has been trending down since July 2007 when a record 4.04 million homes were on the market, continues to decline according to the same NAR data. A total of 2.38 million existing homes were for sale on the MLS in December, a fall of 9.2% and bringing us down to the lowest level since March 2005 when 2.30 million homes were available for sale. The current inventory represents 6.2 months worth of supply, down from 7.2 months in November.
"The inventory supply suggests many markets will see prices stabilize or grow moderately in the near future," Yun said.
On the flipside, prices are still falling slightly as foreclosures and cash buyers continue to dominate the market. The national median existing home price for all housing types was $164,500 in December, a drop of 2.5% year on year.
Distressed homes - foreclosures and short sales - accounted for 32% of sales in December, up from 29% in November, and 100% cash sales accounted for 31% of purchases in December, up from 28% in November and 29 percent in December 2010. First time buyers were responsible for 31% of sales in December, down from 35% in November.
However, none of this is contrary to a market being at the bottom. Investors are always first in on a market's bottom and when evidence mounts that a market is at bottom then prices continuing to fall simply means they are getting in early. Nor will investors complain about the fact that rents are rising, according to the government’s consumer-price index rents for primary residences were up 2.5% year on year in December.
- Thursday 26 January 2012