Economic Update – Existing Housing Sales Dip Unexpectedly
- Feb 26, 2009
The National Association of Realtors reported on Wednesday that sales of existing homes fell 5.3 percent in January, which translates to an annual pace of 4.49 million, the most sluggish such pace since July 1997. The drop came after a small uptick in December that was attributed to falling prices.Prices are still falling, but industry speculation has it that some buyers were holding off in January in anticipation of government action of some kind on the housing problem. In any case, roughly 45 percent of home sales in January involved distressed property transactions, including foreclosures, reported the NAR. The association also noted–and this likely counts as good news–that the inventory of unsold homes fell 2.7 percent in January to 3.6 million, which is about a nine-and-a half-month supply at January’s sales pace. Roughly a quarter of the houses now on the market, or about 900,000, are distressed properties.Breaking it down by single-family vs. multi-family (condo) sales, single-family home sales dropped 4.7 percent to a 4.05 million annual rate, while the drop in condo sales was a lot steeper: 10.2 percent, to a 440,000 pace. Compared with a year ago, sales of single-family homes were down 7.1 percent, while sales of condo units were down 20.3 percent.Unsurprisingly, given these numbers, condo development and conversion in most parts of the country is virtually at a standstill, with various projects canceled outright or delayed indefinitely. For example, on Wednesday during a conference call, Jacksonville-based St. Joe Co., the largest private landowner in Florida, noted that it has taken a $28.3 million impairment charge related to the writedown of its SevenShores condo development and Perico Marina project near Sarasota.”As has been reported frequently, there is virtually no demand for condominium projects in this market at this time,” said Bill McCalmont, executive vice president & CFO, during the call. “It’s also important to note that we have not commenced vertical construction.”Are there any relatively strong condo markets these days, at least in terms of sales if not development or conversion? CPN put the question to Richard Swerdlow, CEO of Condo.com. “We’ve seen growth in transactions in South Florida in the last year, which might be due to prices being off 30 percent or so in that period,” he noted. “It might also be because of renewed threats in South America, particularly Venezuela, driving flight capital.””We’re also seeing lots of activity in metro Washington, D.C., because of government job growth,” he continued. “There’s activity in the Carolinas, especially the coasts, which is still popular with Europeans, and Texas is also seeing more activity than you might expect.”Stress test is the latest jargon in the financial world, and it does have the cheerful side effect of conjuring up images of bankers on tread mills. On Wednesday, the federal government detailed just what a stress test would actually mean for banks: an assessment of how they would hold up under both baseline and more dire economic circumstances, or “adverse” scenarios, to use government terminology. Such scenarios assume an average unemployment rate of 8.9 percent this year and 10.3 percent for 2010–quite possible, all things considered.Perhaps out of relief that the “stress test” wasn’t worse, bank stocks were up Wednesday, though the broader indices were down somewhat. The Dow Jones Industrial Average dropped 80.05 points, or about 1.09 percent, while the S&P 500 was down 1.07 percent and the Nasdaq off 1.14 percent.