Existing Home Sales Soared In September


The National Association of Realtors reported today that existing home sales jumped in September by 9.4% to an annualized rate of 5,570,000, seasonally adjusted. The rest of news regarding September's home sales was also largely positive, with inventory decreasing and prices decreasing less than usual. Does this indicate that we've finally reached the housing bottom? Maybe, but I'm not convinced a new housing sales boom will endure.

This newly updated picture of existing home sales certainly seems to show that we're trending in the right direction, and that the worst is behind us (based on NAR data):

Existing Home Sales 2009-09.PNG

Of course, September looks great over the prior year, but it's still a relatively low level. Annual sales in 2006 were 6.5 million -- 17% higher than last month.

Can we only go up from here? Well, it depends what's been driving this sales growth and how foreclosures trend. Neither factor may have a happy fate in the near-term.

Let's start with the reason for the upwards trend. The most naïve immediate explanation is that consumers are feeling better about the real estate market, so buying more homes. That's probably part of it. But I'd suggest it has a lot more to do with the prospect that the first-time home buyers credit may be allowed to expire at the end of November. Right now, its fate is in jeopardy, as Congress decides whether it will renew the credit. That likely created an unnaturally high number of first-time buyers rushing to get their purchase in during September.

If that is driving sales, and I don't see how it couldn't be, then how Congress acts will determine what sales do in the coming months. Yet, sales will likely decrease before long -- no matter what Congress does. As soon as it announces it intends to extend the credit into 2010, then sales will likely drop, as first-time buyers won't have to rush to get their purchase in. If they say they aren't extending the credit, then high sales will continue through November, and then plummet in December. Of course, sales will drop further under the scenario where the credit isn't renewed, but I'd imagine October or November will mark a peak for home sales either way.

Then there are foreclosures. They're continuing, now being driven by the recession more than wacky resetting mortgage products. I've also noted a potential shadow foreclosure inventory problem, where even once delinquencies decline, evictions may continue as banks slowly release more foreclosed properties into the market.

None of this bodes well for home sales after November. Following the October/November peak, we'll likely see numbers return to the sub-5 million annualized range. Renewing the first-time home buyer credit may help. But then, there are only so many first-time buyers out there who can afford a home, so that population may get exhausted before too long.

Jump to comments
Presented by

Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.
Get Today's Top Stories in Your Inbox (preview)

Adventures in Legal Weed

Colorado is now well into its first year as the first state to legalize recreational marijuana. How's it going? James Hamblin visits Aspen.

Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus


Adventures in Legal Weed

Colorado is now well into its first year as the first state to legalize recreational marijuana. How's it going? James Hamblin visits Aspen.


What Makes a Story Great?

The storytellers behind House of CardsandThis American Life reflect on the creative process.


Tracing Sriracha's Origin to Thailand

Ever wonder how the wildly popular hot sauce got its name? It all started in Si Racha.


Where Confiscated Wildlife Ends Up

A government facility outside of Denver houses more than a million products of the illegal wildlife trade, from tigers and bears to bald eagles.


Is Wine Healthy?

James Hamblin prepares to impress his date with knowledge about the health benefits of wine.


The World's Largest Balloon Festival

Nine days, more than 700 balloons, and a whole lot of hot air



More in Business

Just In