Economists' Commentary: Existing Home Sales in September
October 23, 2009

By Lawrence Yun, Chief Economist, NAR

Sales surged in September. Existing home sales (single-family plus condos and coops) increased 9.4 percent in September to a seasonally adjusted annual rate of 5.57 million units from a 5.09 million unit pace in August (revised down from 5.10 reported earlier. Compared to the same month one year ago, existing home sales were higher by 9.2 percent.
Inventories at the end of September decreased by 7.5 percent and there were 3.63 million home available for sale. Based on the current sales pace it would take 7.8 months to exhaust the inventory. The months' supply of inventory at the current sales pace fell to 7.8 months - the lowest level in two and a half years (or more precisely since March 2007). I would say a consistent months' supply of less than 7 months would be needed for consistent price stabilization. We're almost there, but not quite.
The dent in inventory is helping lessen the severity of price declines. The national median existing home price in September was $174,900, which is a decline of 8.5 percent from one year ago. Though a decline from one year ago, it is the lowest percentage magnitude in over a year.
Regionally, home sales rose in all four major regions. From August to September seasonally adjusted sales changes were as follow:
In the Northeast, existing home sales increased 4.4 percent
In the Midwest, sales increased 9.6 percent
In the South, sales increased 9.0 percent
In the West, sales increased 13.0 percent
Prices were lower in all four regions. From one-year ago, prices were lower by 7.0 percent in the Northeast, 1.0 percent in the Midwest, 7.6 percent in the South and 15.1 percent in the West. Broadly speaking home values have fallen by 25% to 30% from the peak depending upon which price data is looked at. The Midwest region really did not encounter any housing bubble, yet prices have fallen there as well. But we are now seeing much less pressure for price to fall in the Midwest.
There is very little difference in the condo sales trend compared to the single-family home sales. Condo sales increased 9.7 percent while single family home sales rose 9.4 percent. But there is a continuing difference between the two property groups in terms of inventory, with condo inventory at 11.0 months supply while single-family inventory is steadily getting trimmed to a now-7.8 months' supply. No surprise then that the condo prices have experienced a larger price decline. Condo prices declined 11.7 percent while single family home price were lower by 8.1 percent. Please be mindful that the condo sales only make up about 15 percent of all sales.
Sales continue to be dominated in the lower priced homes. Sales of homes priced under $100,000 increased 22.5 percent. For homes priced at $100,000 to $250,000, sales rose 6.0%. Sales are down from one year ago for those homes priced above $750,000. In September, 70% of transacted homes were priced under $250,000.
By metro level, sales were strong in Miami, Houston, and New Orleans - with the latter two seeing a large year-over-year change because of depressed sales one year ago when a major Hurricane hit the region. Among the large metropolitan regions, sales were down from one-year ago in Atlanta, Indianapolis, Pittsburg, and San Antonio.
The annual survey of home buyers (not REALTORS®), suggests that the first-time buyer accounts for 45 percent of all buyers. The number of distressed sales, those that are short sales or foreclosed sales, made up 29 percent of all sales in September. It accounted for 45 to 50 percent of all sales late last year and in the early months of this year.
The home buyer tax credit stimulus measure is having its intended impact of lifting sales, lowering inventory, and lessening the price decline pressures. Sales in the past 3 months are at a 5.3 million unit pace versus the 4.6 million unit pace in the 3 months prior to the stimulus package. The jump in sales of roughly 15 percent from pre-to-post stimulus is occurring despite 4 million job losses over the same time period. And there are still a sizable number of people who are in a position to respond to tax incentives.
Are there financially qualified renters who are ready to enter the market? NAR estimates that roughly 5 million additional renters exist today versus in 2000 (before the housing market went through a boom) who have the necessary income today to buy a median-priced home. So there is plenty of pent-up demand that could be released into the market.
The housing market is very close to reaching the point of a self-sustaining recovery. When home values show consistent stabilization or even a slight increase, then the buyer fear-factor will no longer be at play. We are ever so close to reaching that self-propelling housing market recovery. But without an extension in the home buyer tax credit the housing market could face a double-dip recession.
We have to be mindful that the tax credit is not only about people in the market. 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. We're getting early indications of price stabilization, 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
If home values do not stabilize, expect re-default rates to soar on recently modified mortgages and the first-time foreclosures to ramp up again. Getting trapped in the vicious cycle of lower prices fueling foreclosures and further pressuring lower prices and all the accompanying economic damage is a possibility as well. Why then take the chance when the home buyer tax credit extension and expansion will help firm up the foundation for a sustainable recovery.
Finally, let's be clear. When money is dangled in their faces, bad players will look to cheat the system. Knowing this, it is very troubling that there are no tight government safeguards in place to prevent abuse. All fraud needs to be prosecuted to the fullest extent of the law. We cannot have a good, working program be slammed by few rotten individuals. Quickly eliminate the bad and keep the good because the vast number of legitimate middle-class home buyers is responding to the tax incentives and in the process helping the broader economy to recover.

"Copyright National Association of REALTORS®, Reprinted with permission."

Getting Real Results from Social Networking

You can turn Facebook and social networking sites into money-making generators for your real estate business, said panelists of REALTOR® Magazine’s Young Professionals Network during the session “Marketing Strategies That Work” at the 2009 REALTORS® Midyear Legislative Meetings in Washington, D.C. Facebook recently helped Koki Adasi-Efuya, of Long & Foster Real Estate in Rockville, Md., land and connect with three clients, he said. Soon after he reconnected with a high school friend on Facebook, his friend asked Adasi-Efuya to sell his house. And that led to a surge of referalls. After the sale, the friend’s sister called and asked him to sell her house. They communicated via Facebook during the selling process, since she lived an hour away. Soon after, the friend’s father contacted Adasi-Efuya—also through Facebook. He wanted to sell his house, too. Adasi-Efuya said that reaching out to his friend wasn't a strategy to build business; he was just sending a message to say happy birthday. But now he knows that just like in real life, expanding his sphere of contacts on Facebook can lead to new clients. Panelist Adasi-Efuya is a member of the 2008 REALTOR® Magazine “30 Under 30” class. Blogging for CredibilityDarrin Friedman, the branch vice president of the Coldwell Banker Residential Brokerage office in Chevy Chase, Md., says blogging turned out to be his social networking silver-bullet. It has helped him recruit sales associates, build regional and national credibility, and ultimately make his company more profitable. He attributes his blog to helping his brokerage receive more than $5 million in referrals in 2008. Plus, he says his blog (www.Cbblogestate.com) had a part in recruiting and luring half of the 70 agents he has recruited to the company since January 2007.Make Your Own Path to SuccessTapping social networking—such as Facebook, Twitter, and blogs—can particularly be good tools in reaching the largest segment of future home buyers on the market today—Gen Y and Gen X, panelists said. Panelists offered the following tips on how you can get similar results in your marketing:
Advertise on Facebook. Spread the word by purchasing ads along the side of Facebook pages. You can set an age, gender, and location target market and have your ads appear on Facebook pages that match your criteria. You can also track your ad’s progress in real time to see who has been clicking on it.
Make information available electronically and virtually. Gen Y and Gen X buyers love to see rich data, charts, graphs, and electronic forms, but provide all of the information you have for them on a CD, flash drive, or online so that they can take it with them to analyze themselves later, said Amanda DiVito, ABR®, CRS, of RE/MAX Alliance in Arvada, Colo. Gen Xers (she pegged those born between 1961 and 1981) tend to be skeptics and question everything and are fact-seekers, she said. She called Gen Y (those born between 1982 and 2000) intellectually curious and tech-savvy.
Create group or business pages on Facebook. Create a Facebook group page to connect with prospects, such as a group geared to “first-time home buyers” where you provide helpful information. Or create a business page for your company, and ask others to become “fans” of your page. Whether on Facebook, LinkedIn, or Twitter, the idea of social networking is to communicate within online communities of people who share interests and activities, said Adasi-Efuya.
Use status updates to stay in front of your network. On Facebook, you can use status updates and the Wall—the public viewing area on your network’s pages—to stay top of mind among your sphere. The simple “Happy Birthday” on a friend’s Wall that led to three listings for Adasi-Efuya also went to all his Facebook contacts. Likewise, you can use Twitter—a microblogging site based on the question “What are you doing now?”—to keep people alerted to what you are doing in your business.

Be professional. Make your status as a real estate professional clear by posting a professional photo and creating a complete profile at social networking sites you frequent. Remember also that your duties under the REALTORS® Code of Ethics extend to your online communications.

Show your personality but not your sale pitch. Friedman said blogging is an opportunity to engage in dialog with customers and employees, to challenge assumptions, meet like-minded people, a way to get skeptical clients to know you, and an avenue to let clients know more about who you are. However, he warns, blogging should not be self-indulgent, and you should not attempt to control the message or make it product-driven. Instead, blogging should be transparent, inclusive, authentic, vibrant, and consumer-driven, Friedman said. Friedman requires his new sales associates to create an Active Rain profile within 10 days of starting at the company and then to send a link to everyone in their sphere. Follow blogging best practices, he said, and you’ll become an authoritative source on this business.

—Melissa Dittmann Tracey, REALTOR® Magazine
(REALTOR® Magazine Daily News Online, May 13, 2009).

Greetings from Chicago!

Wayne Syphers, 2010 President of the Greater Portland Board of REALTORS®, and Kelley Craig, Executive Officer, joined 1800 other leaders in Chicago last week for the National Association of REALTORS® Leadership Summit. This was fully funded this year by NAR's Right Tools Right Now program.

This summit is designed to bring together the leadership of local and state boards to be briefed on everything from national trends to local politics. We were able to hear from 2010 NAR President, Vickie Cox Golder from Arizona, as well as updates from Lawrence Yun, NAR Economist.

Cathy Whatley, 2003 NAR President and Keith Holm, St. Paul Area Association of REALTORS® EVP, spoke on Leadership Roles and responsibilites, best practices and areas to improve in REALTOR® association management.

As usual, NAR put on a fantastic program that outlined traits and trends in leadership. We enjoyed 2 of the most inspiring speakers.

Allyson Levine has climbed peaks on every continent, served as the team captain of the first American Women's Everest Expedition, and skied across the Arctic Circle to the geographic North Pole. Her presentation offers a unique perspective on the topics of leadership, teamwork, innovation, and dealing with a changing environment.

Christopher Gardner is the head of his own successful brokerage firm - but just 25 years ago, he was homeless, carrying all his possessions on his back, and occasionally living in a bathroom at a train station. A true testament to perseverance, Gardner tells his story of overcoming obstacles, "breaking cycles," and hard-won success. The amazing story of Gardner's life was the inspiration for the movie "The Pursuit of Happyness," starring Will Smith as Gardner.

Laurie Janik is General Legal Counsel for NAR and gave us an informative legal update of issues facing associations. The great news is that the trend is FEWER lawsuits involving REALTOR® boards.

Please visit for Leadership Summit materials and speaker bios. You will find the reading well worth your time!

MAR treated us to 2 very nice dinners on the streets of Chicago - thank you!