–Months Supply Still 8.5; Inventories Shrinking Toward Winter

By Denny Gulino and Ian McKendry

WASHINGTON (MNI) – U.S. sales of existing single-family homes, town
homes, condominiums and cooperatives slipped under expectations, falling
3.0% to a 4.91 annual million rate, as higher downpayment terms and
loan-to-value limits imposed by lenders in some areas, particularly the
West, appeared to restrain closings, the National Association of
Realtors reported Thursday.

Expectations for September had centered on 4.95 million. August
sales were revised upward slightly to a 5.06 million rate.

NAR Chief Economist Lawrence Yun said “the September data is not
that exciting.” With the sales rate bouncing around most of the year,
“They’re in a holding pattern, not breaking out, but when it does it can
only go up.”

Nevertheless even the “very steady, but steady at a low level”
overall sales rate means the year will end up about where the NAR has
been predicting, about 4.9 million sales, he said.

Several metrics, including the high proportion of all-cash sales
and sales of distressed properties and last-minute cancellations — and
the low proportion of first-time buyers point to continuing distortions
in the housing market.

Added to that, Yun said, has been the decision during the summer by
some mortgage originators, notably Bank of America and Citibank, to
tighten loan standards by requiring higher down payments and
loan-to-value levels for larger mortgages in anticipation of the GSEs
lowering of the conforming loan limits in most areas made effective Oct.
1.

“We’re monitoring that carefully,” Yun said. “One has to ask, what
is the policy in lending at a time when banks are making near record
profits,” to purposely exclude some buyers? he said. In a survey of 669
counties in 42 states, the NAR has found 16% of buyers dropped out of
the homebuying process because of the changes in lending terms. The
increasingly widespread requirement for a 20% down payment on mortgages
above the Fannie Mae and Freddie Mac limit “is greatly hindering many
buyers from reaching the marketplace.”

September’s 8.8% sales decline in the West, he said, may be at
least partly because of the constraints on so-called jumbo mortgages.

The one region where sales went up, the Northeast, could have seen
a rebound from bad weather the previous month that discouraged sales
activity, he said.

A positive sign for future sales activity, Yun said, is how 64% of
Realtors are reporting either rising or constant rents. When rents go
up, he said, that encourages house sales.

The national median home price in September slipped to $165,400,
down 3.5% from a year earlier.

The total of units available for sale droped 71,000 in September
from August, a sign, Yun said, of the usual seasonal shrinkage in
inventories that begins in August. The pool of available properties that
in September included 3.48 million units may well contract to 3.0
million by winter, he said.

Asked by MNI about the uptick in foreclosure activity shown in the
latest RealtyTrak survey, Yun said, “The foreclosure situation will
continue to remain high, probably for the next couple of years.” The big
question is whether there will remain enough buyers for the foreclosed
properties and the good news for Realtors, he said, is that, so far, as
many as come on the market are being absorbed. “Realtors are saying,
bring on those foreclosed properties,” Yun said.

Yun also said the completion of the somewhat controversial process
of rebenchmarking the NAR’s sales numbers is being further delayed by
the difficulties of gathering original courthouse data but that it is
now clear the process will produce a “measurable downward revision” from
the monthly numbers based on Realtors’ reporting the NAR has been
providing. The exercise has confirmed there has been some double
counting of sales, he said.

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

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