Home Sales May Be Stabilizing, But No One Sees An Upturn

(MoneyWatch)  Declining home sales are starting to show signs of bottoming, but any upturn could still be a long way off.

Sales of existing homes in March fell three percent from the preceding month and seven percent from the preceding year. Prices rose a tad in the month, but on a nationwide basis are still down 12 percent from a year ago. First-time buyers and foreclosure sales still dominate volume. Since November, though, sales have settled into an average annual pace of about 4.6 million homes, which economists at Northern Trust think could be the bottom. But not even the cheerleading National Association of Realtors, which tabulates home sales, sees a turnaround coming.

Other economists, including six private-sector forecasters surveyed by the WSJ's Real Time Economics blog, grudging agreed that the steep plunge in home sales since 2005 seems to be over. The six can't have much conviction in that view, however: the current situation is more negative than the history they build their models from, so the old rules don't apply very well. Most of the group called for further weakness in prices.

Activity varied a lot by region:

• Versus a year earlier, prices were down everywhere, ranging from six percent in the Midwest to 18 percent in the Northeast.
• From month to month, however, prices rose in all regions except the Northeast. They're usually up at this time of year, but the monthly increase for March 2009, four percent at the median, is bigger than the usual one percent. That's still not much of a bounce, and since unemployment (and potential homebuyer anxiety) is still rising, however, I doubt there's a real trend here.
• Sales picked up in the western states by 19 percent from a year ago, but they've been rising since early 2008. "The improvement in sales in the Western region is an encouraging sign that discounted prices, record low mortgage rates and various tax incentives are stimulating new demand," writes Nomura Global Economics, another firm cited by the WSJ.

More ominously, the inventory of unsold properties is still very high, at about a 10 month supply. Lawrence Yun, chief economist of the National Association of Realtors, told me that if sales picked up to an annual rate of five million -- about where they were in first half of 2008 -- the industry could reduce housing inventory to normal levels by the end of 2009. As the trade group's in-house economist, Yun has every incentive to be optimistic. But he acknowledged that with the employment outlook so bad, even the combination of cheap mortgages and affordable houses might not entice too many new buyers into the market.

The NYT's David Leonhardt makes a more realistic appraisal after a field trip to a real estate auction:

There are reasons, though, to think that prices may be on the verge of stabilizing. Relative to fundamentals, like household incomes and rents, houses nationwide now appear to be overvalued by only about 5 percent. You can make an argument that the end of the housing crash is near.

But that's not what I found at the auctions.

He describes sales of mid to higher-priced homes in the mid-Atlantic down 30 percent from just a year ago, and a condominium in Boca Raton trading at $30,000. And based on his small but telling sample, he cautions prospective buyers not to hurry:

[Home prices] don't have as far to fall today, but the great real estate crash is not over, either. So if you are part of the 30 percent of American households who rent and you're trying to decide when to buy, relax.

The market is still coming your way.