Home Value Declines Continue to Drive Sales

By
Real Estate Broker/Owner

The NAR published their quarterly home sales report this past week which shows the rate of home sales for all 50 states as well as the District of Columbia.

Of the 51 total markets, 41 of them showed year over year home sales declines from the 2Q of 2008 to the 2Q of 2009.

The year over year data, the weather man's guide, is a better indicator than month over month data as it accounts for seasonal variances as well as providing a larger scope to interpret the information, in other words, a frame of reference.  It is this year over year perspective that is often swept under the carpet by the media when reporting on the economy and housing market.

The only markets to see year over year increases in home sales were Arizona (41.5%), California (20.8%), District of Columbia (5.6%), Florida (20.9%), Iowa (1.6%), Maryland (4.4%), Michigan (10.0%), Minnesota (12.7%), Nebraska (6.4%), and Nevada (76.8%).  Not surprisingly, the places with the largest increases in home sales were also the same places with the most significant declines in home values.

In other words, despite the Fed's efforts to plunge mortgage rates and the governments $8,000 first time home buyer tax credit, the primary driver of home sales continues to be home value declinesThe governments housing stimulus plans are not positively impacting demand for most of the markets in the country. 

Broadly speaking, the NAR report showed that nationally home sales fell -2.9% from the 2Q of 2008 to the 2Q of 2009.  Interestingly, of the four major regions, only one showed an increase in home sales, the West, by 11.8%.  In the Northeast, the Midwest, and the South, home sales were down -8.4%, -5.3%, and -7.2%, when compared to the previous year.

What this report reveals is that as foreclosures are on the rise throughout the country due mounting job losses, demand in the majority of markets remains insufficient in dealing with the problem.  According to RealtyTrac, individual property foreclosure filings were up 20.3% during the first half of 2009 when compared to the first half of 2008.  On the other hand, using the NAR data for first half of 2008 and the first half of 2009, it reveals that home sales are down by -5%.  This supply and demand imbalance means that home values are going to erode further.

Comments (6)

John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Mark - I believe that many people expect home sales and prices to completely rebound quickly in conjunction with the end of the recession.  And as your post points out, it's just not going to happen.  And, not only will the housing market take many years to recover; it will fail to rebound to the "bubble" highs for a decade or more.

Aug 16, 2009 10:11 AM
Suesan Jenifer Therriault
JTHIS-Professional Home Inspection Team - Blakeslee, PA
"Inspecting every purchase as if it were my own".

John and Mark, this is what I have been telling friends, family and associates for a while now. I was hoping however to have been proven wrong. I guess we're going to have to get used to a new normal.

Aug 16, 2009 10:29 AM
Mark MacKenzie
Phoenix, AZ

John:  As you have written about before, we are not going back to where we were, not for many years.

Suesan:  This is indeed the new normal, falling home values.  I think we have another two to three years left of this type of market.

Aug 16, 2009 10:32 AM
Jim Crawford
Maximum One Executive REALTORS® - Atlanta, GA
Jim Crawford Atlanta Best Listing Agents & REALTOR

Why am I not surprised that Atlanta Georgia is not on the list?    Increased sales at distressed prices is not good either.  What is is showing us is a slow moving landslide in pricing taking place before our eyes.

Aug 17, 2009 02:50 AM
Mark MacKenzie
Phoenix, AZ

Jim,

That is a great analogy about the slow moving landslide in prices, that is exactly what we are seeing.

Home sales in Georgia were off -4.8% from the 2Q of 2008, not bad, but I would have thought it would have been better due to the decline in home values.

Aug 17, 2009 02:53 AM
Shirley Parks
Sands Realty 210-414-0966 - San Antonio, TX
Broker, 210-414-0966, San Antonio TX Real Estate

Interesting post, Mark.  Our market hasn't shown the declines other areas have shown.

Aug 18, 2009 10:47 AM