US Home Sales Fall

The National Association of Realtors today released its figures on sales of existing homes for the month of February. The figures showed 4.59M sales last month. The S&P 500 (INDEXSP:.INX) was down slightly just after the figures were announced. The report follows on the building permits and housing starts figures which were released yesterday. Those showed a decline in starts but a small rise in permits. Most were disappointed at the figures which showed a less than consistent incline in the recovery of the housing market. Today’s figures also suggested a slowing recovery of the housing market. Sales for January had been initially reported at 4.57M, while December and November accounted for sales of 4.38M and 4.4M respectively. The increase in the January numbers was revised  today to 4.63M. Analysts had predicted a figure of around 4.61M for February.

This index suffers from large revisions almost every month. The December numbers, originally given as 4.61M, were revised to just 4.38M. The volatility in the market as it recovers makes it difficult to properly assess the actual state of home sales until some time after the fact. The January revision was not unexpected as both the pending home sales index and the Mortgage Purchase Index both declined in January. Though the sample size used in this survey is large the current market swings stymie attempts to get a more accurate view quickly. The index is still useful as a barometer of confidence in the housing market. Existing home sales do much to show the strength, or weakness, of demand for housing. This figure, when used alongside the housing starts and permits figures help pinpoint the direction in which the market is heading.

Today’s figures when put analysed alongside yesterday’s show the housing market is undergoing a far from clear cut recovery. The mild weather may have accounted for a certain amount of Winter’s increases. The problems inherent in the figures and the imposition of external factors on the market make it difficult to properly assess the extent to which a recovery is happening or if one is happening at all. The figures do make clear some of the problems faced by the market. Lenders are still making it difficult for people to finance their homes. This is made clear by the low level of first time buyers in the market. The second and more obvious concern is that confidence has not yet returned on the side of the buyer in the housing market.