US Existing home sales and home prices drop as investors makeup 33% of all purchases

Housing drops again.  According to NAR, existing home sales fell in Feb almost 10% to an annual rate of 4.9 MM.  This is way lower than expected.  YOY sales are down 2.8%.

Supply rose 3.5% to 3.488 MM homes in what is 8.6 months of supply at the current sales rate, up from 7.5 months in January and even above year-ago February supply of 8.4 months. The median price fell 1.1 percent February alone to $156,100 with the average price down 1.4% to $203,000. Year-on-year, the decline for the median price is deepening, at minus 5.2%, but is steady for the average price at minus 2.7%.

Distressed sales made up a very heavy 39% of all transactions with cash transactions at 33%.  Translated, investors bought up much of the inventory as credit approvals for first time home buyers remains low.  Via NAR:
Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, dropped 9.6 percent to a seasonally adjusted annual rate of 4.88 million in February from an upwardly revised 5.40 million in January, and are 2.8 percent below the 5.02 million pace in February 2010.

All-cash sales were a record 33 percent in February, up from 32 percent in January; they were 27 percent in February 2010. Investors accounted for 19 percent of sales activity in February, down from 23 percent in January; they were 19 percent in February 2010. The balance of sales were to repeat buyers.

The national median existing-home price for all housing types was $156,100 in February, which is 5.2 percent below February 2010. Distressed homes – sold at discount – accounted for a 39 percent market share in February, up from 37 percent in January and 35 percent in February 2010. “The decline in price corresponds to the record level of all-cash purchases where buyers – largely investors – are snapping up homes at bargain prices,” Yun explained. “We’d be seeing greater numbers of traditional home buyers if mortgage credit conditions return to normal.”
All this points to no good news for the housing sector.  I don't know where this thing will stop dropping, but by all indicators, housing does not looked like it has finished it's freefall.  We have been saying since last year that a 10-20% drop in housing was imminent.  We have seen it fall % since we made that call and we expect at least another 5% drop in the coming year, but perhaps up to 15%.  This could also get much worse if the interest rate goes up like we expect.

As most policy makers seem fixated on keeping prices from falling to stop the complete and utter wipe out of the housing sector, have a look at what has happened in Miami.  Miami suffered a 18.6% price drop over the course of the last year.  But, they have also had a 46% increase in home sales.  It doesn't seem like the bloodbath of housing prices ruined the housing market in Miami.  If anything, it made it more robust by allowing other buyers to come in.

All extraordinary measures (ultra-low interest rates, home buyer tax credit, gov't mandated loan mods, Fed MBS purchases, bailouts) put off the inevitable and have caused the housing problems to keep America sick for far too long.



Median Price
YOY

#
MSA
Feb-10
Feb-11
Price
Sales
1
Atlanta
110,100
95,100
-13.6%
-4.0%
2
Baltimore
236,200
214,200
-9.3%
17.0%
3
Boston
315,800
303,200
-4.0%
-10.9%
4
Cincinnati
120,100
113,000
-5.9%
5.5%
5
Dallas-Fort Worth
139,700
146,800
5.1%
-14.5%
6
Houston
147,500
153,500
4.1%
-0.1%
7
Indianapolis
112,300
109,300
-2.7%
-12.0%
8
Kansas City
122,000
119,400
-2.1%
-9.8%
9
Miami-Ft. Lauderdale
190,900
155,400
-18.6%
46.4%
10
Minneapolis-St. Paul
159,000
142,500
-10.4%
-1.7%
11
New Orleans
n/a
n/a
n/a
n/a
12
New York-Northern New Jersey-Long Island
380,000
376,700
-0.9%
0.0%
13
Philadelphia
201,600
194,600
-3.5%
-4.1%
14
Phoenix
139,400
126,900
-9.0%
8.4%
15
Portland
234,200
214,800
-8.3%
-0.1%
16
San Antonio
n/a
n/a
n/a
n/a
17
San Diego
349,500
367,800
5.2%
-3.3%
18
St. Louis
102,700
111,100
8.2%
-8.6%
19
Washington, DC
290,600
287,500
-1.1%
5.8%
20
U.S.
163,900
157,000
-4.2%
-3.1%

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