Austin REAL ESTATE

Existing-home sales rise for the second straight month

According to the National Association of Realtors (NAR), sale of existing-homes
rose to a seasonally adjusted annual rate of 4.77 million units in May, denoting
a rise of 2.4% over the April figure. This is the second straight month of
increase in sale of existing-homes, due to a plentiful supply of homes and
availability of attractive mortgage rates. According to NAR, this is the first
back-to-back rise since August and September 2005. "While sales may not have yet
reached an absolute bottom, clearly a bottoming process is underway," said
Wachovia, a financial services firm.

The total number of existing-homes available, at the end of May, stood at 3.80
million units; this represents a 9.6-month supply at the current sales pace,
down from a 10.1-month supply in April, according to NAR. Lawrence Yun, NAR
chief economist, expressed concerns about "faulty valuations that keep buyers
from getting a loan." Yun said: "Lenders are using appraisers who may not be
familiar with a neighborhood, or who compare traditional homes with distressed
and discounted sales. In the past month, stories of appraisal problems have been
snowballing from across the country with many contracts falling through at the
last moment." Yun warned of a "delay in housing market recovery" and a "further
rise in foreclosures" if the appraisal problems are not quickly corrected."
Regionally, existing-home sales in May rose 3.9% in the Northeast, 9% in the
Midwest, remained unchanged in the South, and dropped 0.95% in the West.

The state of the nation's housing

Despite the current slump, the long-term prospects for the housing industry are
not bleak, according to the "The State of the Nation's Housing 2009" report,
released by Harvard University's Joint Center for Housing Studies (JCHS). The
report details factors such as unemployment and the credit crisis leading to
problems in the sector. Home equity is positively correlated with consumer
spending, and plunging home values have pulled down consumer spending and
economic growth in the last couple of years. Analysts say that the current
recession provides a painful but a much needed correction to the housing market.


But is there a silver lining anywhere? The so-called echo boomers, who are the
children of baby boomers, will be a big source of housing demand in the next
year and beyond, according to the report. "Echo boomers are larger than the baby
boomer population. Couple that with immigration and you have the seeds, the
possibility of a housing recovery," said Nicolas Retsinas, director of JCHS. The
report states that minorities will drive 73% of household growth in 2010-20,
with Hispanics leading the way at 36%. Given the lower average incomes and
wealth of minorities, the increase in minority households "could add
significantly to the nation's already widespread housing affordability
challenges," according to the report.