clip_image002

The Mortgage Corner

The first 2 months of 2010 have been brutal for real estate. Construction, new and existing-home sales have fallen—in part because the new-home tax purchase credit lapsed in December, before being renewed until June 2010. This is on top of the “atypical” winter weather that has basically halted new-home construction. But some prices are firming, a good sign for a spring and summer recovery.

clip_image004

Housing starts have been volatile lately and this time the culprit was atypically severe winter weather. Snow storms bumped down housing starts in February, leading to a 5.9 percent drop, following a 6.6 percent rebound the month before. February’s annualized pace of 0.575 million was up 0.2 percent on a year-ago basis.

Highlighting the impact of the snow storms are starts by region.  The February drop in starts was led by a 15.5 percent plunge in the South which typically has relatively good weather for groundbreaking that time of year.  Also, starts in the Northeast fell 9.6 percent. Both regions were hit by heavy snow storms during the month. Starts in the Midwest rose 10.6 percent while the West gained 7.9 percent.

Sales of new single-family houses in February 2010 were at a seasonally adjusted annual rate of 308,000, according to estimates released jointly today. This is 2.2 percent below the revised January rate of 315,000 and is 13.0 percent below the February 2009 estimate of 354,000.

clip_image006

But January was revised 6,000 higher to 315,000 with December revised 3,000 lower to 345,000. Supply swelled to 9.2 months in line with a similar reading on the existing-home side. Sales fell most steeply in the two least active regions, the Northeast and Midwest, while showing a small decline in the South and a gain in the West. Interestingly, prices firmed in the month, up 6.1 percent to a median $220,500 and up 5.1 percent to an average $282,600.

clip_image008

Existing-home sales, which are finalized transactions that include single-family, townhomes, condominiums and co-ops, slipped 0.6 percent nationally to a seasonally adjusted annual rate of 5.02 million units in February from 5.05 million in January, but are 7.0 percent higher than the 4.69 million-unit pace in February 2009.

NAR chief economist Lawrence Yun also said widespread winter storms in February may mask underlying demand. “Some closings were simply postponed by winter storms, but buyers couldn’t get out to look at homes in some areas and that should negatively impact near-term contract activity.

“Although sales have been higher than year-ago levels for eight straight months and home prices are much more stable compared to the past few years, the housing recovery is fragile at the moment,” he said.

The national median price of existing-homes was $164,300, down 2.4 percent from one year ago, but condominium prices held steady at $170,200. The Northeast region had a whopping 7.5 percent median price increase for all homes over February 2009, but all other regions had median price drops.

The bottom line will be whether existing-home inventories begin to decline significantly during this selling season. Total housing inventory at the end of February rose 9.5 percent to 3.59 million existing homes available for sale, according to NAR, which represents an 8.6-month supply at the current sales pace, up from a 7.8-month supply in January. Raw unsold inventory is 5.5 percent below a year ago.

“The key test for a durable recovery comes in the next few months as the tax credit deadline approaches,” Yun said. “If we see a surge in home buying comparable to last fall in the months leading up to the original tax credit deadline, then enough inventory should be absorbed to ensure a broad home price stabilization.”

Harlan Green © 2010