The National Association of REALTORS announced today that the seasonally adjusted rate of existing home sales posted a 2.4% gain from the previous month to a rate of 4.77 million units. However, sales were still down -3.6% year over year.
While the inventory of homes for sale declined -3.5% from last month and are down -15.3% from last year, there is significant evidence pointing to the fact that we are only in the eye of the storm right now in terms of foreclosures. With the real unemployment rate surging to 16.4%, with a record 12% of all mortgages at least 30 days late, and with Alt-A and Option ARM resets still on the horizon, the next tsunami of foreclosures appears that it will begin to make land-fall the second half of this year.
The reason that this relationship between the supply (foreclosures) and demand (sales) for real estate is relevant is because it is what drives home values. Not only is the housing market having a difficult time working through the current inventory, but there are millions of more foreclosures on the way. The result is that home values will continue to erode.
Washington's housing stimulus plan of lower mortgage rates and an $8,000 first time home buyer tax credit has had very little impact on stabilizing the housing market. They are bringing a knife to a gun fight.