Housing Markets Recovery — Still on the Flight Plan But With Some Light Turbulence

March existing home sales, as reported by the National Association of Realtors® (NAR) , showed good improvement compared to March 2012, with sales on a seasonally-adjusted annualized rate (SAAR) up 10.3 percent to 4.92 million, while median price jumped 11.8 percent to $184,300. These are both preliminary numbers subject to change. Once again the story is limited inventory, with just a 4.7 month supply on hand at the end of March (again on a seasonally-adjusted basis). Remember, most real estate economists believe that six months inventory is normal for existing homes. Thus the inventory today is considered very tight and will lead to continued escalating prices. From a monthly sequential perspective in February 2013, March 2013 sales declined 6/10ths of 1 percent, while prices jumped 6.4 percent.

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For those of you that have followed my housing analyses over time, I have a greater preference of examining and comparing a 12-month moving average which removes the noise that occurs from month-to-month, such as in the number of business days, weather, other distractions and so forth. In that light, the latest 12-month moving average of housing sales is up 10.1 percent to 4.77 million sales on a SAAR basis, and median price ballooned 9.2 percent to $179,870.

The following graph shows a continuing recovery in housing regarding sales volumes. Recognize this is based on 12-month moving average of the number of sales. The real story here is that, when examined from a 12-month moving average, home sales have risen now for 21 consecutive months. That means that the latest month of data is pulling up the prior 11 months. Without question, the U.S. market is recovering.

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The 12-month moving average of sales is the leading indicator of where prices are heading, though lagged 12 to 24 months. The following graph of the 12-month moving average of median U.S. homes prices now shows increasing home prices (again based on the 12-month moving average) for 13 consecutive month. In the prior 12 months, median prices rose 9.2 percent, and are now off 19.8 percent from the peak reached in July 2006 – a peak which was unsustainable given the reliance on subprime lending, minimal down payments, dramatically relaxed lending standards, and accelerant-pushed housing values.

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Highlights of the NAR March sales statistics included:

  • Cash sales made up 30 percent of all closings in March 2013
  • Investors were 19 percent of all buyers, off from 22 percent in the prior month and 21 percent in March 2012
  • 30 percent of all purchases were first-time buyers
  • Homes were on the market in March 2013 a median 62 days contrasted to 91 days a year ago
  • Tightening supply is illustrated by the decline from a median 74 days on the market in February of this year to 62 in March
  • More than one-third (37 percent) of homes sold in March 2013 were on the market for less than one month
  • Foreclosures made up 13 percent of March 2013 sales which sold at an average discount of 15 percent when compared to non-distressed sales
  • Short sales represented 8 percent of all closings in March 2013, with an average discount versus non-distressed sales of 13 percent
  • Distressed sales in March, a combined 21 percent of all closings, retracted significantly from the 29 percent rate just one year ago

To read the entire NAR March 2013 housing sales press release, along with associated data links, click here.

The bottom line is that housing continues the path of recovery. But just like an airplane, occasional turbulence takes place—and I believe that is what we saw when comparing February 2013 to March 2013 regarding the number of sales.

I doubt that very few individuals, a year or two from today, will regret having purchased a home in March 2013. But they had better have obtained a fixed-rate loan.


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