Wednesday, November 25, 2009

Unexpected home sales spurt, affordability, reasons to give thanks

Holy waffles! Eggo shortage!
Tax credits, other government incentives, low mortgage rates and low home prices, send both new and resale home sales zooming in October. But can it last?

by Broderick Perkins
© 2009 DeadlineNews.Com
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Deadline Newsroom - Driven by tax credits, other government incentives, low mortgage rates and low home prices, both new and resale home sales took an unseasonable leap in October.

Existing home sales nationwide, including single-family, townhomes, condominiums and co-ops in October surged 23.5 percent ahead of October 2008's weak sales, according to the National Association of Realtors (NAR).

The sales pace, up 10.1 percent from September, is the highest its been since February 2007.

Also bucking the seasonal norm of slower fall sales, new single-family homes, in October, were 5.1 percent more than a year ago and up 6.2 percent from the previous month, according to the U.S. Commerce Department.

"The rise in new home sales is encouraging. Sales have risen substantially above their low in January, and the inventory of unsold homes has fallen sharply. Low mortgage rates and the extension and expansion of the tax incentive should support continuing sales growth in the coming months," said Commerce Under Secretary Rebecca Blank, in a prepared statement.

Freddie Mac reported November 25, the average rate for a fixed rate mortgage (FRM) on 30-year conforming loans fell to 4.78 percent this week, matching a record low set in the week ending April 30 earlier this year.

Both the 15-year FRM (4.29 percent) and the 5-year adjustable rate mortgage (ARM, 4.18 percent) were at their lowest levels, at least since 1991, when Freddie Mac first starting tracking rates.

The median sales price of new houses sold in October 2009 was $212,200, down from $213,200 a year ago. The average price was $261,100, down from $274,000 a year ago, according to the Commerce Department.

NAR put the median price for existing single-family homes at $173,000 in October, down 6.8 percent from a year ago. Sales were 21.4 percent above those from a year ago.

With condo sales soaring 40.8 percent above last year's, the median price, $172,900 was nearly the same as single-family homes.

NAR said distressed properties accounted for 30 percent of sales in October and put distorted downward pressure on median prices because they sell at a discount compared to traditional listings.

The small boom in home sales could end soon, concedes NAR officials.

Surprised by the big sales gains, Lawrence Yun, NAR chief economist, surmised "Many buyers have been rushing to beat the deadline for the first-time buyer tax credit that was scheduled to expire (but was extended and expanded) at the end of this month, and similarly robust sales may be occurring in November."

He also cautioned, "With such a sale spike, a measurable decline should be anticipated in December and early next year before another surge in spring and early summer."

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

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