Experts Respond to January Home Sales Report
In response to data released by the National Association of Realtors (NAR) on Wednesday, experts overall agreed the housing market is heading towards recovery but advised certain factors need to be taken into consideration when analyzing the numbers. Here are responses from Capital Economics, IHS Global Insight, and Moody Analytics.
Month-over-month increase in January of 4.3 percent
Capital Economics:
“[It] is not quite as encouraging as it first appears given that it comes at the expense of a 5 percent downward revision to the previous month’s figures. Nevertheless, it’s still the case that existing home sales are recovering, albeit only gradually.”
December’s total was revised downward to 4.38 million from 4.61 million, and January’s seasonally adjusted annual rate is 4.57 million.
Celia Chen, senior director, Moody’s Analytics:
“Sales of U.S. existing homes marched upward in January, maintaining a trend that started in the second half of last year. Slow, but steady gains in existing-home sales, falling inventories, and softening in the median house price depreciation all point to a good start for 2012.”
The Northeast, Midwest, South and West increased in home sales
Capital Economics:
“Existing home sales rose in each of the four regions in January, including an 8.8 percent month-over-month gain in the West. Taking the past few months as a whole, the improvement in existing home sales has been broad based.”
Patrick Newport, U.S. economist, IHS Global Insight:
“Indeed, the market for existing homes is about as strong as it has been in five years, nationally and in all four regions. True, we saw better numbers during some months in 2009 and 2010, but these were driven by the two homeowner’s tax credits, which shifted activity across time, without appreciably raising overall sales. Single-family sales account for almost all of the recent improvement.”
Housing inventory for January fell 0.4 percent from the previous month, with a 6.1-month supply in
January, down from a 6.4-month supply in December
IHS Global Insight:
“Inventory dropped to 2.31 million units, the lowest level since March 2005; the months’ supply, at 6.1 months, was at its lowest level since March 2006. These numbers suggest that the housing glut is going away. Other data suggest that getting rid of the excess will be a drawn-out affair that will take at least two more years.”
Factors that help move the U.S. towards recovery
Capital Economics:
“Improving consumer confidence about the house price outlook and higher loan-to-value ratios available from banks point to a further improvement in sales later this year.”
Moody’s Analytics:
“Job growth is gaining traction and consumer confidence is lifting. Moreover, housing remains highly affordable, with mortgage rates near record lows and house prices still declining in many regions of the country.”
Factors that can hinder recovery
IHS Global Insight:
“Investors have accounted for almost all of the increase in sales the past four months. Sales to non-investors have improved marginally, probably because credit is tight. Tighter credit has taken many forms, including higher down payments, stricter appraisal standards, higher fees, more documentation, and a smaller line of products. There are no signs that credit is easing, one reason that we are not expecting sales to take off anytime soon.”