Celebration Should Be Put On Hold for Now

On the surface, things sure are looking up these days when it comes to the nation’s housing sector as a whole. And the press is eating it up, declaring a housing recovery is underway.

The latest numbers put out last week by the Commerce Department and the National Association of Realtors (NAR) for May, and Case-Shiller for April, are evidence that there is good reason for a degree of optimism for an eminent recovery. Still, there should be a measure of caution thrown into the mix before a national block party breaks out.

As far as new home sales go, the Commerce Department announced a 7.6 percent monthly increase in May over revised April sales numbers for new single-family homes, up 19.8 percent on a year-over-year basis. Seasonally adjusted, the estimation was that 145,000 new homes were for sale at the end of May, a 4.7 month supply. Median sales price of new homes in May was $234,500, while the average sales price was $273,900. That’s good news, of course.

The NAR had mixed results to report in May, with pending sales of existing single-family homes up to their highest level in the last two years, increasing 5.9 percent and up 13.3 percent from May 2011. By contrast, existing home sales were constrained by low levels of inventory plus still strong sales levels (25 percent of all May sales) of distressed properties — foreclosures and short sales — at discounted prices. In all, existing home sales were down 1.5 percent from the previous month but still 9.6 percent above the level reported a year ago.

The average home price was up 1.3 percent for both the 10-city and 20-city composites in April, according to the latest press release from the Case-Shiller Home Price Indices. But the increase came on the heels of seven consecutive months of declining prices, which should still keep analysts on edge as to which direction the market is headed overall in the short term at least.

Then there was the May report from RealtyTrac, showing a 9 percent gain in foreclosure activity from April, but still 4 percent below the level reported in May 2011. U.S. foreclosure activity was back up over the 200,000 level after two consecutive months below 200,000 properties with foreclosure filings. And foreclosure starts increased nationwide on an annual basis after 27 consecutive months of year-over-year declines.

Whether this is the beginning of a second wave of foreclosures now that the major banks have agreed to the $25 billion foreclosure settlement and are past the whole robo-signing fiasco, has yet to be seen. As with any housing indicators, one month does not make a trend.
 Frankly, it’s too early to tell yet whether any of this is sustainable into the foreseeable future. Keep your fingers crossed folks. We could still be in for a bumpy ride along the bottom of a very slow recovery cycle for some time to come.

We’d like to know what you think. Should we be breaking out the party favors yet?

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