Home Sales Tick Up 2nd Month In A Row, Equity Still Down

WASHINGTON–Though existing home sales showed its first back-to-back monthly gain since 2005, a separate report shows homeowners’ equity is still falling.Existing home sales in May increased by 2.4%. And though year-over-year, existing home sales are down by 3.6%, sales of single-family homes and condominiums increased by 1.9% and 6.1% respectively.Median housing prices also showed a monthly gain of 3.8%, but year-over-year, they have fallen by 16.8%.Overall, NAFCU Economist Katrin O’Connor said, the housing market continues to show signs of stabilization, benefiting from lower prices and first-time buyer tax credits.“At the same time, distressed property sales declined to one third of all sales,” NAFCU reported. “Foreclosures further depressed home prices, a trend that is expected to continue over the next few months. As long as mortgage rates do not increase significantly higher, we should start to see a stabilization in home prices and a clearing of the market’s excess inventory by the first half of next year. If the appraisal problems do not get resolved quickly, however, this might delay the housing market recovery and result in a further surge in foreclosures.In a separate report released by the Joint Center for Housing Studies at Harvard University, U.S. home equity fell by $2.5 trillion in 2008 and is now off $5.9 trillion from 2005–more than 43%.Southwest Corporate Economist Brian Turner said the study indicates that in states where housing prices have taken the biggest hits, home values have been diluted to levels resembling the 1990s and early 2000.“The study reports that after slipping 1.7% in 2007, the median price of existing single-family homes fell another 9.8% in 2008. This would put the aggregate decline in prices at approximately 30% for the period of October 2005 and January 2009,” Turner explained. “Still, home equity appears to remain more important to household wealth than other investments as home equity on average is at least triple the amount associated with household investment. Given the combination of low values and higher loan balances from cashing out equity, Moody’s estimates that more than 14 million households own homes that are worth less than their outstanding mortgage.”