American House Prices Continue to Fall

American existing house sales bounced back strongly in September with first-time buyers driving much of the activity, marking five gains in the past six months. However, the American average existing house price was $174,900 (£105,234) in September, 8.5 percent lower than a year ago. Distressed properties continued to distort downwards the average price because they generally sell at a discount relative to traditional houses in the same area.

Existing house sales – including single-family, townhomes, condominiums and co-ops – jumped 9.4 percent to a seasonally adjusted annual rate of 5.57 million units in September and sales are 9.2 percent higher than in September 2008. Sales activity is at the highest level in over two years.

Lawrence Yun, National Association of Realtors (NAR) chief economist, said favourable conditions matched with a tax credit are boosting home sales. “Much of the momentum is from people responding to the first-time buyer tax credit, which is freeing many sellers to make a trade and buy another home,” he said. “We are hopeful the tax credit will be extended and possibly expanded to more buyers, at least through the middle of next year, because the rising sales momentum needs to continue for a few additional quarters until we reach a point of a self-sustaining recovery.”

Even with the improvement, Yun said the market is under performing. “Despite spectacular gains in the stock market, principally from the financial sector recovery, most of the 75 million home owning families have more wealth tied to their homes. Home values could soon turn consistently positive and help the broad base of middle-class families, but we are not there yet,” he said. “We’re getting early indications of price stabilisation, but we need a steady supply of qualified buyers to meaningfully bring inventories down and return us to a period of normal, steady price growth and to fully remove consumer fears, which would then revive the broader economy. Without a firm foundation for middle-class wealth recovery, the post-recession economic growth likely will be one of the weakest in U.S. history.”

Early information from a large annual consumer study to be released November 13, shows that first-time house buyers accounted for more than 45 percent of house sales during the past year. A separate practitioner survey shows that distressed houses accounted for 29 percent of transactions in September.

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said affordability conditions remain historically high. “Potential first-time buyers can take heart in that affordability conditions this year are the highest on record dating back to 1970, but with the first-time buyer tax credit scheduled to expire at the end of next month, people could hold back from entering the market,” he said.

“Our read is that housing overshot on the downside because homes are selling for less than replacement construction costs in much of the country, and the home price-to-income ratio has fallen below the historical average,” McMillan said.

Northeast
Existing house sales in the Northeast increased 4.4 percent to an annual level of 950,000 in September, and are 11.8 percent higher than September 2008. The median price in the Northeast was $234,700 (£141,215), down 7.0 percent from a year ago.

Midwest
Existing housesales in the Midwest jumped 9.6 percent in September to a pace of 1.25 million and are 7.8 percent above a year ago. The median price in the Midwest was $147,600 (£88,808), which is 1.0 percent below September 2008.

South
In the South, existing house sales rose 9.0 percent to an annual level of 2.06 million in September and are 10.8 percent higher than September 2008. The median price in the South was $153,500 (£92,358), down 7.6 percent from a year ago.

West
Existing house sales in the West surged 13.0 percent to an annual rate of 1.30 million in September and are 5.7 percent above a year ago. The median price in the West was $219,000 (£131,768), which is 15.0 percent below September 2008.
exchange rate used £1 = $1.662