Foreclosures Loom Large over Housing Market
Nearly one-third of existing home sales in May involved foreclosure and short sales.
Furthermore, this development is putting downward pressure on housing prices and propping up sales, according to the National Association of Realtors.
Over the past several months, "we have seen home sales rising in distressed markets where prices have already declined significantly.
The improving affordability conditions are drawing homebuyers back into these markets," NAR senior economist Paul Bishop said.
He noted sales have picked up in distressed markets like Battle Creek, Mich., Sarasota, Fla., Las Vegas, and in Orange Country, Calif., Riverside and Sacramento.
The median home price in the West has declined 16% since May 2007.
Meanwhile, sales have softened in markets that have be stable and have continued to enjoy job growth in 2007, such as Portland, Seattle, Raleigh, N.C., and Salt Lake.
Overall, the Realtors reported that sales of previously-owned homes, condos and co-ops rose 2% in May to a 4.99 million seasonally adjusted annual rate.
Sales have bounced around the 5 million mark since September 2007.
At the same time it appears short sales and sales of bank owned real estate are taking on a larger share of monthly sales.
Nationally, single-family house prices have declined 15% since May 2007, according to Standard & Poor's Case-Shiller housing price index, which covers 20 major metropolitan areas.
Professor Karl Case noted in a recent article that the downward "stickiness" of house prices is being challenged by foreclosure sales.
"As long as the foreclosure auctions continue to account for a significant portion of the observed transactions, prices will continue to fall until the market clears. When it does, the traditional stickiness will return and prices will eventually stabilize," the Wellesley College professor said.
NAR reported the inventory of existing single-family homes for sale fell slightly in May to 3.8 million, which is a 10.4 month-supply at the current sales pace.
The U.S. Census Bureau reported that inventory of newly constructed single-family homes fell slightly in May to 453,000, which is an 11-month supply.
After a bump up in April, new homes sales resumed their long decline in May and fell 2.5%.
And economists at the National Association of Home Builders are still looking for the bottom in new homes sales amid gloomy data.
"Home builders have been doing everything they can to limit production of new units and move existing inventory, but it hasn't been enough to make a significant dent in the backlog yet," said NAHB chief economist David Seiders. (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/