• 23
  • February
    2011

Last month, the number of previously occupied homes sold across the country rose to a seasonally adjusted annual rate of 5.36 million. While this is a promising increase of 2.7 percent from December's annual rate of 5.22 million, realtors and economic analysts say that it does not necessarily indicate much progress in the housing market. In order to the market to be considered 'healthy', realtors say, there should be 6 million annual home sales.

In addition, the number of homes sold to investors increased in January, while the number of first-time homebuyers dropped to 29 percent (first-timers should account for about 40 percent of home sales). This means that home foreclosure cash sales are making up a large percentage of homes sold, which in turn causes median home sale prices to drop.

And median prices did fall last month to just under $160,000, which is a decrease of almost four percent from a year ago and the lowest median sale price recorded since early 2002. This has contributed to the nearly 3.4 million homes on the market in January. Realtors say that it would take almost eight months to move through that inventory, when there should generally only be six months worth of homes on the market at any given time.

Realtors say that several factors are contributing to the hesitance of first-time homebuyers to enter the market. First, mortgage lenders have enacted stricter lending standards and raised minimum down payments, effectively blocking cash-strapped potential homebuyers from making purchases. Second, unemployment continues to lag in Tennessee and throughout the country. While economists expect job loss to slow this year, home sales will likely not recover as potential homebuyers remain hesitant about their financial future.

Source: Atlanta Journal-Constitution, "Foreclosures, cash deals lifted January home sales", Derek Kravitz, 23 February 2011