–December Revised to Slight Minus Change
–‘Genuine Price Stabilization’ Possible for 2012

By Denny Gulino and Ian McKendry

WASHINGTON (MNI) – U.S. sales of existing single-family homes, town
homes, condominiums and cooperatives rose 4.3% in January to an annual
rate of 4.57 million and “genuine price stabilization” is possible this
year, particularly if household formation improves, the National
Association of Realtors reported Wednesday.

December’s change was turned into a slight minus of 0.5% as
seasonal factors were updated. The 2011 year’s total remained 4.26
million sales. January’s sales had been expected to be 4.65 million.

“The uptrend in home sales is in line with all of the underlying
fundamentals, ” NAR Chief Economist Lawrence Yun told reporters,
“pent-up household formation, record-low mortgage interest rates,
bargain home prices, sustained job creation and rising rents.”

The number of homes available for sale was down to 2.31 million in
January, the lowest since March 2005 and representing just 6.1
months supply at the current sales rate with inventory always lowest of
the year in the winter months. “Supply and demand may be coming into
balance,” Yun said.

A year ago the Miami market has six years of supply, Yun said.
“Today there is five to six months of supply, a quick change.”

Notably, he added, bank-owned properties after foreclosure are
being snapped up as they are made available in many states, particularly
in markets like Las Vegas, Phoenix, Riverside and Miami. “REO is not
lingering in the market, with multiple bids of investors, so no
problem,” Yun said.

However, in so-called judicial review states, where foreclosures
are bottled up by the need for court action, “the foreclosure inventory
is actually rising,” he said. That’s where, he said, large-scale
REO-to-rental programs by hedge funds and private equity groups “may
make sense.” Yun acknowledged, however, that the NAR is not a big fan of
the REO-to-rental proposals by the Federal Reserve and others because
Realtor members are afraid it could rob them of thousands of sales.

“A government proposal to turn bank-owned properties into rentals
on a large scale does not appear to be needed at this time,” Yun said.

The January national median price was $154,700, down 2.0% from a
year earlier. He said this year does still promise “genuine price
stabilization,” particularly if household formation “pops” back up after
four years of suppression. In years before the financial crisis, the 3
million annual increase in the general population would produce 1
million to 1.2 million new households. But with young couples living
with parents or “doubling or tripling up” the last four years have seen
households formed at half the usual pace.

“Inevitably that has to begin to pop out, like a coiled spring,”
Yun said, with the question still whether that rebound happens this
year.

Still, Realtors report supply constraints in some markets so even
without a household formation rebound, “The broad inventory condition
can be described as moving into a rough balance,” he said, between
buyers and sellers.

January sales were up in all four geographic regions with the
biggest increase the 8.8% in the West.

Contract cancellations are still at a high rate, the 33% where
they’ve been for several months, but Yun said he’s “discounting
that” because “sales are not declining at all.” Apparently
buyers are getting adept at turning around and signing another
contract immediately when one falls through because of “friction
in the market.”

Investors continued to be active in January, accounting for 23% of
home sales, up from December’s 21%. That’s should be expected because
family purchases trail off in the winter months, Yun said, to pick up in
the spring and summer when the school year is not such a big factor.

Reacting to Tuesday’s unveiling of what the regulator of
Fannie Mae and Freddie Mac said was a strategic plan for the GSEs’
future, Yun said the NAR still favors a return to the structure
pre-1970, when Fannie Mae was “a simply government corporation,”
without a profit motive. “That worked well.”

Thirty-five percent of all January transactions were of
“distressed” properties, up from 32% in December. Of those, 22% were
sales of foreclosed properties.

All-cash transaction made up 31% of the January total, a “fairly
consistent” percentage for several consecutive months.

First-time buyers made up 33% of the total, “still well below
the 40% that is normal, but inching up,” Yun said.

For 2012, Yun said he’s “very comfortable that a meaningful
percentage gain” could be achieved with perhaps “some modest price
gain.”

** Market News International Washington Bureau: 202-371-2121 **

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