The Wood and Fiber Supply Chain Experts
Housing Market Update
From the February 2010 Forest2Mill newsletter.
November pending home sales data, which fell 16 percent from
October's level, predicted the December drop in both existing and new home sales, falling 16
percent from October’s level (Table 1). The pending home sales figure is still 15.5 percent higher
than it was in November 2008.
Sales of existing homes fell to 5.45 million units in December, down 16.7 percent from
November (see Table 1), though this is still 15 percent above December 2008 levels. As we noted in
this column last month, this turn was expected.
Lawrence Yun, chief economist at the National Association of Realtors, attributed the swing
to the first-time homebuyer tax credit. “We’ll likely have another surge in the spring as
homebuyers take advantage of the extended and expanded tax credit. By early summer the overall
market should benefit from more balanced inventory, and sales are on track to rise again in 2010.
However, the job market remains a concern and could dampen the housing recovery—job creation is key
to a continued recovery in the second half of the year.”
Months of inventory of existing homes rose in December, up from 6.5 months to 7.2 months.
This is 10.8 percent higher than November, but still an improvement of 23.4 percent from December
2008.
Sales of new homes declined in December as well, though November’s sales were revised upward
from 355,000 to 370,000. After the revision, sales were down 7.6 percent from November to December,
with just 342,000 units sold. This is 8.6 percent below December 2008’s level. Inventory lost
ground as well. December’s inventory jumped 6.6 percent to 8.1 months. While disappointing, this
figure is still 27.7 percent better than December 2008’s number.
Home prices were stronger in December. The median price for existing
homes increased to $178,300, increasing $8,300 from the previous month. Year over year, prices
increased 1.5 percent. The median price for new homes showed greater strength in December,
increasing from a downwardly revised $210,300 in November to $221,300.
Housing permits increased in December, but starts and completions both fell (see Table 2).
Housing permits increased from 589,000 in November to 653,000 in December, a 10.9 percent increase.
Year over year, permits up 15,8 percent.
Housing starts fell from 580,000 in November to 557,000 in December, a decrease of 4
percent. This represents an increase of .2 percent over the December 2008 level. Completions
decreased 11.2 percent in December, moving from 865,000 in November to 768,000. This represents a
25.3 percent year-over year decline since December 2008.
While most of the housing statistics and indicators suggest a
recovery is underway, there are a couple of additional data points we’re keeping our eyes on:
foreclosures and mortgage interest rates.
Our concerns over foreclosures and interest rates remain. that as soon as prices recover
enough for the banks to move these units into the actual inventory of homes for sale, the glut will
cause prices to decline again.
While we still expect mortgage rates to increase throughout 2010, the month over month trend
from December to January was down, not up. According to Freddie Mac’s Primary Mortgage Market
Survey, 30-year fixed interest rates have been hovering around the 5 percent mark pretty
consistently over the last month. Bankrate quoted the overnight average for 30-year fixed mortgages
for January 27 at 5.06 percent.