Sujani Murthy
Berkshire Hathaway Home Services
Fox & Roach
44 Princeton Hightstown Rd
Princeton Junction NJ 08550
609.799.2022 Office
609.540.9114 Mobile
609.799.4270 Fax

Market Trends

How Bad Is the Housing Market?


After months and months of gloom-and-doom reports about the housing market, the latest month has finally started to produce evidence of some positive movement. Yet there are still plenty of economists out there forecasting a seemingly endless downturn for the weakened U.S. housing and mortgage markets. Where does the truth lie? Are things really that bad, or really that good? The answers are unclear but several new reports give definition to the many facets of the situation.

Freddie Mac: No Price Recovery Until 2011

Chief economist for government-backed mortgage giant Freddie Mac spoke to the National Economist Club in Washington D.C. on April 2 and proclaimed that though there are a few signs of healing in the housing market, home prices will continue to drop through 2010. "It'll be 2011 before we see any improvement or increase in these national U.S. house price measures," he said.

Nothaft also concluded that the housing market will remain on it weakening course for at least the next several months as foreclosures continue to rise and unemployment number soar.

The current market suffers from an overload of inventory, and roughly 40 percent of the current supply are foreclosed homes. These homes distort the median selling price and the true value of the properties.

He did try to add some positive spin on the outlook saying, "the good news is low mortgage rates," speaking of the record lows on long-term mortgages charted in the past month. "That will help to promote affordability for home buyers and provide refinancing opportunities for many owners who have loans," Nothaft added.

Mortgage Applications on an Upward Swing

And those low rates are having the desired effect on mortgage applications. The Mortgage Bankers Association has reported that its weekly application index has increased during each of the past four weeks. During the week ended March 27, the index was up 3 percent, led heavily by homeowners interested in refinancing out of the current loans. Almost 80 percent of all mortgage applications were for refinance loans.

In addition, while it is true that most of the current applications are refinance requests, home purchase applications are still being filed, especially by plenty of first-time home buyers seeking to take advantage of low interest rates and government tax incentive programs.

Pending Home Sales Up

According to the National Association of Realtors, home sales are increasing as well. The group's pending home sale index for February rose by 2.1 percent over January, although current figures are still down over the fourth quarter of 2008.

'More buyers are getting into the market to take advantage of stimulus incentives and much improved housing affordability conditions, but it will take a few months before we could see this turn up in measurable sales contract activity,' said NAR chief economist Lawrence Yun.

And the NAR index of housing affordability actually rose to a new record high in February, measuring 36.3 percent higher than this time last year.

Therefore, the market state is currently as follows: Homes are more affordable, interest rates are lower and there are plenty of choices for prospective buyers. Yet unemployment remains at higher-than-normal levels, making it difficult for many to capitalize on the incredible buyers market. Job creation may have to increase significantly before the full housing correction can be made.

National Existing Home Sales Data

Home Sales Pace

Sales of existing U.S. homes perked up in February, according to data from the National Association of Realtors. The number of sales grew to a seasonally adjusted annual pace of 4.72 million units, up from 4.49 million in January. The current pace is still down however; over February 2008, figures when sales reached a seasonally adjusted 5.03 million units.

The national median home price actually increased in February for the first time in seven months. The price rose to $165,400 from $164,800 in January, led by strong gains in the Northeast. One year ago, the national median price was higher at $195,600.

The NAR defines existing homes as all previously owned single-family homes, townhouses, condominiums, and co-ops. The group "seasonally adjusts" the sales numbers to factor in things like inclement weather, school sessions, winter holidays, etc to smooth out the trends. The NAR also describes its sales data based on an annual pace. The monthly figure represents the total number of housing units sold in one year if the current rate were to continue unchanged.

Sales Pace by Region

Home sales were up across the board in February for an average 5.1 percent nationwide, with the Northeast leading the way. Sales there increased by 15.6 percent to 740,000 units, up from 640,000 the previous month. From the February 2008 sales, however, the numbers are still down 14.9 percent.

The South also showed a significant increase in sales, with numbers growing to 1.74 million units, up 6.1 percent from 1.64 million in January. In year-over-year comparisons, sales in the South are still down 11.2 percent though.

The West had a slower monthly growth rate, with sales rising 2.6 percent to 1.2 million from 1.17 million the previous month. Compared with last year, however, sales are up an incredible 30.4 percent!

The Midwest saw a slight increase in sales in February, with a 1.0 percent up-tick to 1.04 million homes, from 1.03 million in January. Sales in that region are still down 14.0 percent over February 2008 figures.

Home Prices

The median home price, the point at which half of all homes sold for more and half sold for less, rose in February in the Northeast and South, stayed constant in the Midwest, and fell in the West.

The median price in the Northeast jumped up to $251,200 from 227,000 in January, but it is down 4.8 percent from a year ago when the price was $264,000.

The South experienced a median price growth to 146,700 from 143,300, although the price is down 10.0 percent over the previous year.

In the Midwest, the median price remained $131,000 for the second month, but it is still down 4.8 percent from February 2008.

The median price took a deep plunge in the West in February, falling to $204,600 from $215,500 the month before. The current price is down 30.3 percent over last year, a sign of how over-inflated Western home prices grew during the housing boom.


The number of existing homes for sale in the U.S. rose 5.2 percent to 3.8 million units from 3.6 million in January. However, at the current higher sales pace, the homes on the market represent a 9.7-month supply, the same amount as the previous month. Total housing inventory has still fallen 5.5 percent in the last year.

Next Report

Data for March existing home sales, prices, and inventory will be available at the end of April.

 © 2018 Agent Image All rights reserved. | Terms | Sitemap Design by Agent Image - Real Estate Web Site Design