Why Existing Home Sales Being Down is GREAT News

by Tyler Osby on February 26, 2009

Looking Beyond the Headlines

In reading the headlines this morning, you’d think that last month’s Existing Home Sales figure shows more trouble ahead for the housing market.

Existing Home Sales

It’s actually the opposite.

Beyond the attention-grabbing headlines is the actual story;  the one that shows  (once again),  that housing market basics are coming back into balance.

Crunching Numbers

As home values tick lower, it appears that buyers focusing on value are stepping in and snapping up the supply.  Yes, it’s true that the number of homes sold fell to its lowest levels in 12 years.  But remember we can’t ignore the fact that the number of homes available to buy fell, too.

  • Banks have put the brakes on foreclosures
  • Economic uncertainty is reducing relocations for new jobs
  • Builders basically stopped building new homes

The national housing supply is as low as it’s been in more than a year.

Supply and Demand

Based on the current sales activity, the national housing supply would be 100% sold in 9.6 months! Remember, this is a two-month improvement from the high point set in June 2008.

Demand for homes is expected to rise, too:

  • The Federal Reserve is trying to hold mortgage rates low by buying mortgage backed securities
  • Fannie Mae is opening its checkbook to real estate investors
  • The stimulus package is granting large tax credits to first-timers

So, it’s not that the headlines are wrong; it’s just that they’re incomplete. Read beyond the lines.

In looking at all of the information and not just the headlines, we can find a lot of hope.  Falling supply plus rising demand leads home values higher and that sounds like a recovery to me!

(Image Kudos: Wall Street Journal Online)

Related Posts

Tagged as: existing home sales, Home, resales, Sales

Leave a Comment

Previous post:

Next post: