NAR Sees Soft Landing as Housing Bubble Transitions To Expansion

Mostly in spite of but a little because of Hurricane Katrina, September existing home sales were tied with last month as the second strongest months in history according to figures released by the National Association of Realtor on October 25.

Total existing-home sales were at a seasonally adjusted annual rate of 7.28 million units, a figure identical to those reported in August. This figure was 7.2 percent higher than the 6.79 unit sales reported in September, 2004. The record for existing home sales was achieved in June, 2005, a rate of 7.35 units. Existing home sales figures include single-family houses, condos, townhouses, and co-ops.

As might be expected, home sales in the areas struck by Katrina were "a fraction" of previous activity; possibly because so few homes remain in many areas. But sales in areas on the fringe of the hurricane areas surged.

David Lereah, NAR's chief economist, said "We are now getting some hard data from (the hurricane) region, with spot checks showing sharply higher home sales to residents who were displaced by the hurricane. The sales surge is more than offsetting declines in the disaster zone."

That increased home purchases in the gulf area are showing up in the data less than a month after Katrina struck seems amazing, but may bode well for the recovery in that area.

The NAR report states that the national average price for existing homes of all types was $212,000 in September, an increase of 13.4 percent over the $187,000 recorded one year ago. The average single family home price was also $212,000, up 14.3 percent since last year but existing coop and condo prices were up "only" 9 percent. Single family homes sold at a seasonally adjusted rate of 6.38 million units in September, up 0.6 percent since last month and 6.9 percent over last year. Sales of condos and coops actually slipped 4.7 percent from the August figures but were still running 10.2 percent above 2004 sales figures.

Housing inventories inched up 0.3 percent over August figures. There is currently a 4.7 month supply of available homes at present sales rates.

Probably reflecting the hurricane-related activity mentioned earlier, the South was the strongest region in September with sales rising 3.7 percent to a record level of 2.83 million units, 12.3 percent higher than last year. The median price in the South was $184,000, up 8.2 percent over last year.

Northeast sales were up 0.8 percent over August stats to an annualized figure of 1.21 million units, a 7.1 percent increase in a year. The median price was $245,000, nearly 11 percent higher than last year.

Both the West and the Midwest showed some slippage. Sales in the West declined 4.1 percent to an annualized rate of 1.62 million units but the region still eked out a 1.3 percent gain over last year. The median price of $302,000 was nearly 15 percent higher than last year.

Sales in the Midwest were down 3.0 percent to annual pace of 1.61 million in September from a record 1.66 million in August, but were 4.5 percent higher than a year ago. The median price in the Midwest was $175,000, 14.4 percent higher than September 2004.

Chief Economist Lereah said the housing market is entering a period of transition. "The underlying fundamentals of the housing market are solid and sales will stay historically strong, but they will trend modestly down from current peaks," he said. "Masked by the data are early signs that housing is starting to wind down from a boom and will transition into an expansion" - in other words, a soft landing.