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Home Publications Blogs CEPR Blog Home Sales Improve in January But Drag on Market Remains

Home Sales Improve in January But Drag on Market Remains

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Written by Dean Baker   
Tuesday, 28 February 2012 11:00

The pending home sales index for January had the highest reading since April of 2010, when the first-time homebuyers tax credit expired. Sales in the South were especially strong, up by more than 10 percent from year-ago levels. New and existing home sales also have shown a similar upward trend, and inventories of both have fallen to a more normal range of close to six months of sales. At the trough of the downturn, the range was near 10 months of sales.

But these positive signs must be viewed with some caution. Monthly data are always erratic, especially in the winter months when weather can be a very important factor. In the case of this winter, an unusually mild January likely boosted sales in the Midwest and Northeast. More importantly, though, the sources of long-term drag on the housing market remain. Despite some improvement in the job market and an increasing willingness by lenders to allow modifications and/or refinancing, we are still likely to see more than 900,000 foreclosures in both 2012 and 2013.

For a more in-depth analysis, see the latest Housing Market Monitor.

Tags: economy | housing | jobs | recovery

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written by JSeydl, February 28, 2012 12:15
In terms of the declines that we’re seeing in inventories, much of the progress is related to homeowners pulling their homes off the market rather than an increase in sales activity. We’re not seeing strong increases in net listings in the NAR data. This pretty much makes sense, considering that home price depreciation has intensified, so I wouldn’t put much weight into the recent inventory declines. Of course, what’s even more important is the non-visible inventory, which is still large at around 1.56 million units. In the coming years, this non-visible inventory will slowly dribble onto the market, which will keep the recovery modest for the foreseeable future.

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